Which of the following statements about how various embedded options benefit the issuers or the bondholders is FALSE? The: A) accelerated sinking fund provision favors the issuers B) Floor placed under the floating coupon rate favors the bondholders C) Conversion provision favors the bondholders if the stock price rises D) Option-adjusted spread directly measures the value of the spread inclusive of the embedded option.
Answer is D
OAS measures the spread…ignoring the option. It is the spread that a simmilar option free bond will have.
so, parry how did you do on that test? I see you’re trying to push through the Qs you got wrong.
I haven’t actually sat down and tested myself. My strategy is to go through test 1 (240MC’s) and then do test 2 and 3 and see what i get.