n NISM Certifications
V-A NISM Series V-A
Medium

The difference between the yield on Gilt and the yield on a non-Government Debt security is called its ______.

Practice question from NISM Series V A - Mock Test 4 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    YTM

  2. Credit Spread

    Correct answer

  3. C

    Yield to Call

  4. D

    Risk Spread

Why this is the answer

The yield on Gilt (government securities) is usually the lowest for a given period. Non-government issuers, being riskier, offer higher yields to compensate for default risk. The difference between the two is called the credit spread.

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