Question: Consider two bonds, Beta and Gamma, which have identical maturity and coupon rates. They also have very similar credit and liquidity risk. The OAS of

Consider two bonds, Beta and Gamma, which have identical maturity and coupon rates. They also have very similar credit and liquidity risk. The OAS of Beta is 45 bps, whereas the OAS of Gamma is 70 bps. Given the difference in OAS, it is likely that:

A Bond Gamma is underpriced (relative to Bond Beta).

B Both bonds are correctly priced.

C Neither bond has credit risk.

D Bond Beta is underpriced (relative to Bond Gamma).

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