Treasury and agency bond prices are quoted as percentages of par value. The smallest increment of change in the quoted price is 1/32 of a percent. For example, the smallest possible change on a bond last traded at 98% of par value is a change to 98 1/32 % or 97 31/32% of par value.

A is at the extreme ends of the efficient frontier and is a variable choice. C is clearly superior to B because it has both a higher expected return and a lower risk. Thus, B cannot be on the efficient frontier.

The option adjusted spread takes into account potential interest rate paths and accounts for the effect of the exercise of the option on the bond. It is the best representative of the spread over a comparable maturity straight bond without an embedded option.