A 6% annual coupon corporate bond with two years remaining to maturity is trading

at a price of 100.125. Th e two-year, 4% annual payment government benchmark bond

is trading at a price of 100.750. Th e one-year and two-year government spot rates are

2.10% and 3.635%, respectively, stated as eff ective annual rates.

1 . Calculate the G-spread, the spread between the yields-to-maturity on the corporate

bond and the government bond having the same maturity.