The risk and term structure of interest rates, Macroeconomics

The Risk and Term Structure of Interest Rates

Expectations Theory and Bond Maturity Level Analysis Prepare calculations and a one to two page analysis, following the APA 6th edition guidelines, that addresses the following:
Assuming that the expectations theory is the correct theory of the term structure, (1)calculate the interest rates in the term structure for maturity. Next, (2)plot the resulting yield curves for the following series of one-year interest rates over the next five years using both a and b.

a. 5%, 7%, 7%, 7%, 7%
b. 5%, 4%, 4%,4%,4%

Lastly, (3)interpolate how your yield curves would change if people preferred shorter-term bonds over long-term bonds. (4)Disclose what the book suggests once the short-term rate is much cheaper than the long-term in interest rate. (5)Substantiate whether or not that is a normal occurrence or a cause for alarm.

Posted Date: 3/25/2013 5:46:03 AM | Location : United States

Related Discussions:- The risk and term structure of interest rates, Assignment Help, Ask Question on The risk and term structure of interest rates, Get Answer, Expert's Help, The risk and term structure of interest rates Discussions

Write discussion on The risk and term structure of interest rates
Your posts are moderated
Related Questions
Henry Ford's Model T was originally designed and built to be run on ethanol. Today, ethanol (190-proof alcohol) can be produced with domestic stills for about $0.75 per gallon. Whe

A firm with a U-shaped average cost curve finds that its revenues exceed its costs when it sets price equal to marginal cost. On which part of its average cost curve is the firm op

Two drivers --- Tom and Jerry --- each drives up to a gas station. Before looking at the price, each places an order. Tom says, "I'd like 10 gallons of gas." Jerry says, "I'd like

Q. Explain the long-run Phillips curve? The long-run Phillips curve The augmented Phillips curve has an important consequence: the long-run Phillips curve must be vertical

Please select either question (a) or question (b).  Do NOT answer both questions. a.  Mr. William Randolph Hearst is an entrepreneur based in California.  He owns many newspaper

Suppose you buy call options on Microsoft stock. Each option costs $2 and has the strike price of $40 and the expiration date July 1. Discuss whether you would exercise the options

Equilibrium in Money Markets Having dealt with the forces that determine the supply of money and demand for money, let us combine supply of and demand for money to determine eq

Differences between absolute advantage and comparative advantage?              Ans) Absolute benefit and comparative benefit are two basic concepts to international trade. Under

Singer suggests that although the right to sell blood does not threaten the formal right to give blood, it is incompatible with "the right to give blood, which cannot be bought, wh

In "Kitchen Nightmares", Chef Gordon Ramsa visits struggling restaurants and gives the owners of the restaurant a number of recommendations intended to reverse the restaurant's pro