If the promised yield on 60-day commercial paper is 3.0 percent and the promised yield on a 60-day T-bill is 2.0 percent, the promised yield spread is closest to:
A) 1 basis point.
B) 10 basis points.
C) 100 basis points.
D) 1,000 basis points.

Question

Quizplus · Accepted Answer

The promised yield spread is calculated as the difference between the yields of two securities. In this case, it's the difference between the 3.0% yield on commercial paper and the 2.0% yield on a T-bill, which is 1.0%. Since 1% equals 100 basis points, the correct answer is 100 basis points.

If the Promised Yield on 60-Day Commercial Paper Is 3