Question: The Z- spread is the constant basis point spread added to the default- free spotcurve to correctly price a risky bond. A Z- spread of

The Z- spread is

the constant basis point spread added to the default- free spotcurve to correctly price a risky bond.

A Z- spread of 100bps for a particularbond would imply that adding a fixed spread of 100bps to the points along thespot yield curve will correctly price the bond

A higher Z- spread would imply ariskier bond.

All of the answers are correct

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