Feb 13 HMWK

Feb 13 HMWK - FINA 3330 HMWK Rosenblum Sarah DeVito...

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FINA 3330 HMWK – Rosenblum Sarah DeVito – February 13, 2008 A) The yield curve is plotted as a change in interest rates in the bond market over a period of time (usually 30 years because that is largest time to maturity bond that is sold). Due to a few theories about the yield curve and for reasons not completely known, the yield curve has historically been an accurate predictor of future interest rates and the possibility of nearing recession. The current yield curve provides somewhat of an anomaly to the usual relationship among short-term and long-term rates. Whereas historically, the average yield curve is upward sloping, the current yield curve is flattening so that some might call it an “inverted yield curve”. This means that long-term rates are about the same as, if not lower than short-term rates. In other words, it seems as if the yield curve and therefore, the bond market, predict that rates will decrease in the future. Unfortunately, this trend has almost always signaled looming recession. Since 1960, there have been 7 incidences of
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Feb 13 HMWK - FINA 3330 HMWK Rosenblum Sarah DeVito...

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