XC-Ch6 - Term Structure 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0...

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Unformatted text preview: Term Structure 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 4/7/2011 6/9/2011 9/8/2011 3/8/2012 Data from Wall Street Journal - Current Treasury Bond Yields [3/15/11] Maturity Coupon Current Previous price Change Yield price 4/7/2011 ... 100 100 0 0.05 6/9/2011 ... 99.98 99.98 unch. 0.08 9/8/2011 ... 99.94 99.94 unch. 0.13 3/8/2012 ... 99.78 99.77 0.01 0.22 2/28/2013 3/15/2014 2 2/28/2013 0.63 100.05 99.98 0.06 0.6 3/15/2014 1.25 100.53 100.34 0.19 1.07 2/29/2016 2.13 100.7 100.38 0.33 1.98 2/28/2018 2.75 100.38 99.97 0.41 2.69 2/15/2021 3.63 102.31 101.91 0.41 3.35 2/15/2041 4.75 103.72 103.38 0.34 4.52 This is a normal, upward sloping yield curve, most likely due to an increase in expected inflati increasing maturity risk premium. The positive slope is an indication that investor expectatio economy will grow in the future, and this growth is due to the expectation that inflation will ris most likely cause the Federal Reserve to tighten its monetary policy and raise the short term rates , which will decrease corporate investment. This decrease in corporate investment will economic growth, and in turn, ease some of the pressure from the inflation premium. Term Structure Column F 3 3/15/2014 2/29/2016 2/28/2018 2/15/2021 2/15/2041 crease in expected inflation and n that investor expectations for the tation that inflation will rise. This will and raise the short term interrest orporate investment will slow the inflation premium. Column F ...
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This note was uploaded on 09/07/2011 for the course BMGT 340 taught by Professor White during the Spring '08 term at Maryland.

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