on 7/1/2009; $5 on 7/1/2010; $105 on 7/1/2011. The corresponding zero-coupon Treasury rates (compounded semi-annually) are: 4.5% for 7/1/2009; 4.7% for 7/1/2010; 5.0% for 7/1/2011. The bond's accrued interest is 0. The Z-spread is 50 bp. Then the price P of this bond on 7/1/2008 is given by: where (for simplicity) the calculation has ignored the slight difference between parallel shifts of spot rates and forward rates. See also Asset swap spread I-spread Option-adjusted spread Yield to maturity References Frank J. Fabozzi, The Handbook of Fixed Income Securities, 7th edition. McGraw-Hill, 2005. Bond valuation Fixed income analysis Credit risk Embedded options