Yield curve - influence the rate of interest, Financial Management

Q. Yield curve - influence the rate of interest?

The normal yield curve demonstrates that the yield required on debt increases in line with the term to maturity. One reason for this is to facilitate loan providers requires compensation for deferring their use of the cash they have lent and the longer the period for which they are deprived of their cash the more compensation they require. This is explaining as the liquidity preference explanation for the shape of the normal yield curve.

Other explanations for the form of the normal yield curve are expectations theory and market segmentation theory. Expectations theory proposes that interest rates rise with maturity because rates of interest are expected to rise in the future for example due to an expected increase in inflation. Market segmentation theory proposes that the market for long-term debt differs from the market for short-term debt.

Posted Date: 7/12/2013 1:26:58 AM | Location : United States

Related Discussions:- Yield curve - influence the rate of interest, Assignment Help, Ask Question on Yield curve - influence the rate of interest, Get Answer, Expert's Help, Yield curve - influence the rate of interest Discussions

Write discussion on Yield curve - influence the rate of interest
Your posts are moderated
Related Questions
The management of Border Bank has asked you to help with it with its market risk calculations. It has compiled the following data on its financial assets: • $500 million of amorti

Reasons for mergers and acquisitions The key reasons for mergers and acquisitions, is to maximise shareholder wealth otherwise it wouldn’t be worthwhile. R

Determine about the Zero Interest Bonds (ZIBs) Very much alike DDBs, only crucial difference is that these are issued at face values (DDBs are issued at a discount to face valu

what is the relevance of virements to public sector accounting

Suppose you have recently been contracted as a financial consultant to a London-based engineering company, Alpha Products Plc. The company uses three components as part of their pr

Madhuban group manufactures a product. The following particulars are as follows: 5 Monthly demand 1000 units Cost of placing an order Rs. 100 Annual carrying cost per unit Rs. 15 N

Q. Show the Projected Balance Sheet Method? Projected Balance Sheet Method: - Under this process an approximate is made of assets and liabilities for a future date and a projec

discuss the applicability of operating cycle to poultry business(consider broilers)

Project Budgets and Reporting Systems: In many cases, where a project is initiated and a budget allocated, a separate account is created to ensure costs attributable to that pr