To construct a theoretical spot-rate curve using Treasury securities, the class of securities that provides the most accurate prices but has the disadvantage of large maturity gaps is: A. on-the-run securities. B. strips. C. off-the-run securities.
On-the-run securities have the greatest trading volume; therefore, they should be the most accurately priced issues. The Treasury only issues bonds of specified maturities, however, and large gaps exist between the maturities.
