Can anyone help me make sense of this problem. How does Bond X have the lowest G spread?
Exhibit 2
Comparative Analysis of Transportation Sector Bonds
| Bond | X | Y | Z |
|---|---|---|---|
| Effective duration | 12.4 | 9.1 | 10.1 |
| Benchmark spread | 125 | 125 | 125 |
Swanson makes the following notes:
- The three transportation sector bonds
- have the same spread as the on-the-run 10-year US Treasury,
- are priced near par value, and
- have roughly equivalent underlying credit risk.
- The yield curve is currently upward sloping.
For valuation reasons, Swanson plans to sell the bond with the lowest G-spread.