Topic 12 Exercise 2 Bond Prices and Yields Yield Curve Interest rates are one of the most important indicators of the future of the economy and they are used extensively by Wall Street analysts. Since the rates on bonds of different maturities behave quite independently with short-term and long-term rates often moving in opposite directions simultaneously, we need to have some understanding of the yield curve. This pattern of interest rate movement can be used to predict economic activity in the future and get a reading of the collective market instinct. The Living Yield Curve describes different term structures that have been observed in the last thirty plus years. After reviewing the material on the shapes of yield curves available on the sight, answer the following questions: 1. Describe the yield curve and how it is constructed. The Yield curve is what economists use to capture the overall movement of interest rates (which are known as “yields” in Wall Street parlance). Plot today’s yields for various
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This note was uploaded on 10/28/2009 for the course MBA MBA608 taught by Professor Martin during the Spring '09 term at Beirut Arab University.