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Hi John,
Hope all is well.
I often find in questions that have bonds in them, that the examiner gives us a list of spot yield curve rates for government bonds as well as a list of spreads in basis points for the credit rating of the security (AAA,AA,A). I didn’t see anything in your lectures which speaks to these bits of information that I sometimes see in past papers. Could you help me out with this please?
Always appreciated.
Depending on the credit rating, the company will be paying more than the spot yield rate. We add the relevant spread to the spot yield rate.
Do read the technical article on the ACCA website on “bond valuation and bond yields” (along obviously with all the AFM technical articles 🙂 )
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