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YTM curve vs Spot curve

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › YTM curve vs Spot curve

  • This topic has 5 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • May 14, 2018 at 3:01 pm #451870
    adolf121
    Member
    • Topics: 19
    • Replies: 39
    • ☆☆

    Hello sir,

    In doing the Levante Co question,the examiner states

    “extracts are provided on the current government bond yield curve and yield spreads for the sector Levante Co opera……”

    Since the word spot has not been mentioned anywhere in question, I assumed the yields given were YTMs and not spot rates, which of course turned out to be wrong.

    So, how can i be sure the figures given in an exam are spots and not YTMs of a government bond.

    This is really confusing me since in the 30.Airline Business(12/07 BPP) question they have stated

    “the current yield curve suggests that, at three years, government treasuries yield 3.5% and at four years they yield 5.1%” and have gone on to use them as the YTMs rather than the spot.

    Thanks for all your hard work. Really grateful for this site. Cheers.

    May 14, 2018 at 6:31 pm #451903
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    Please tell me which exam Levante was in.

    (I cannot remember the names of every question in every exam 🙂 )

    May 14, 2018 at 7:04 pm #451913
    adolf121
    Member
    • Topics: 19
    • Replies: 39
    • ☆☆

    33.Levante Co (12/11, amended)

    May 14, 2018 at 10:17 pm #451962
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    You assume they are spot rates unless obviously you are told different.

    Have soured the technical article on this on the ACCA website?

    Most importantly, if you are unsure in the middle of the exam always (whatever the question is about) state your assumptions. Even if you have assumed something wrongly, you will still get credit for what you have done.

    May 15, 2018 at 12:18 pm #452068
    adolf121
    Member
    • Topics: 19
    • Replies: 39
    • ☆☆

    Thanks John. Appreciate it.

    May 15, 2018 at 6:40 pm #452140
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • The topic ‘YTM curve vs Spot curve’ is closed to new replies.

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