ICMA Exam FMFQ Topic 6 Question 62 Discussion

Actual exam question for ICMA's FMFQ exam

Question #: 62
Topic #: 6

[All FMFQ Questions]

What is the credit spread on a corporate bond?

AThe increased size of the bid/ask spread in a trade price

BThe difference in price between a corporate bond and a benchmark treasury

CThe additional yield required by investors to offset the credit risk of the security

DThe difference between the coupon rate of a corporate bond and the dividend of the issuing company

Show Suggested Answer

Suggested Answer: C

by Marsha at Jul 16, 2024, 07:19 AM

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Ettie

10 months ago

I heard the credit spread on corporate bonds is just the amount of tears shed by the poor saps who bought them.

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Lavera

9 months ago

B) The difference in price between a corporate bond and a benchmark treasury

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Golda

10 months ago

C) The additional yield required by investors to offset the credit risk of the security

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Chuck

10 months ago

A) The increased size of the bid/ask spread in a trade price

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Margot

11 months ago

D? Really? The difference between the coupon rate and the dividend? That's like apples and oranges, man.

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Lewis

10 months ago

B) The difference in price between a corporate bond and a benchmark treasury

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Fausto

10 months ago

C) The additional yield required by investors to offset the credit risk of the security

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Layla

10 months ago

A) The increased size of the bid/ask spread in a trade price

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Naomi

11 months ago

Hmm, I'm torn between B and C. I guess I'll go with C, just to be safe. Credit risk, you know?

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Joni

10 months ago

I'm torn between B and C. I guess I'll go with C, just to be safe. Credit risk, you know?

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Lang

10 months ago

I'm not sure, I thought it was the additional yield required by investors to offset the credit risk of the security.

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Slyvia

10 months ago

I think the credit spread is the difference in price between a corporate bond and a benchmark treasury.

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Sherly

11 months ago

Definitely B. The difference in price between a corporate bond and a benchmark treasury. Easy peasy!

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Juliana

11 months ago

Yes, that's correct. The credit spread reflects the risk of default by the issuer, which is why investors demand a higher yield.

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Ariel

11 months ago

Hmm, that makes sense. So it's more about the risk associated with the bond rather than just the price difference?

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Ellen

11 months ago

I think the correct answer is C. The additional yield required by investors to offset the credit risk of the security.

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Lacey

10 months ago

Agreed. Credit spread is a key factor to consider when evaluating corporate bonds.

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Evangelina

11 months ago

That makes sense. It's important for investors to be compensated for taking on that risk.

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Janae

11 months ago

I think the correct answer is C. The additional yield required by investors to offset the credit risk of the security.

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Gearldine

11 months ago

I disagree, I believe it's the additional yield required by investors to offset the credit risk of the security.

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Ariel

11 months ago

I think the credit spread on a corporate bond is the difference in price between the bond and a benchmark treasury.

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