Bond has negative term premium-pure expectations theory

Assignment Help Financial Management

Reference no: EM13835253

If a bond has a negative term premium, then the yield implied by the pure expectations theory (PET) of the term structure is higher than the yield implied by the liquidity preference theory of the term structure.

Explain why this is true

Reference no: EM13835253

Questions Cloud

Stock using the two-stage dividend discount model : You see a fast growing company that is estimated to have dividend growth of 24%, 20%, and 16% over each of the next three years (24% in year 1 in year 2 20% and in year 3 16%) The company paid a dividend of $2.28 per share over the past twelve months..

Philip morris is the nation''s largest tobacco company : Philip Morris is the nation's largest tobacco company and sells leading cigarette brands such as Marlboro and Virginia Slims. While the health risks of smoking are well known, selling cigarettes has traditionally been considered a safe and profitable..

Training evaluation-training effectiveness : What is the relationship among Kirkpatrick's four levels of evaluation? Would you argue for examining all four levels, even if your boss suggested you should look only at the last one (results) and, that if it improved

What is the importance of marketing in business world : What is the importance of marketing in business world?

Bond has negative term premium-pure expectations theory : If a bond has a negative term premium, then the yield implied by the pure expectations theory (PET) of the term structure is higher than the yield implied by the liquidity preference theory of the term structure.

Portfolio would gain-lose approximately how much money : You have a $250,000 invested in bond A which has a modified duration of 3 and $175,000 invested in bond B which has a modified duration of 12. If interest rates rise by 50bias points, your portfolio would gain/lose approximately how much money?

Describe what happens in the body : Describe what happens in the body when only proteins and fat are ingested but carbohydrates are excluded. Do you think diets that are high in proteins and fat healthy weight-loss alternatives. Why or why not

Large amount of bonds and invested proceeds in real estate : Assessing Insurance Company Operations- As a consultant to an insurance company, you have been asked to assess the asset composition of the company. The insurance company has recently sold a large amount of bonds and invested the proceeds in real est..

A description of christianity : A description of Christianity

User Account

All Pages