14-Term Structure

14-Term Structure - Class Business Current Events Homework...

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Class Business Current Events Homework Equilibrium is the point at which supply equals demand. Bond Supply, Demand and Equilibrium
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When borrowers’ desire for funds increases, the supply curve shifts to the right. This lowers bond prices, raising interest rates. Factors That Shift Bond Supply
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When bonds become more attractive for investors, the demand curve shifts to the right. This raises bond prices, lowering interest rates. Factors That Shift Bond Demand
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Applications of Our Model Use our model to predict what happens when expected inflation increases (this is called the Fisher Effect) What is the relationship between interest rates and the business cycle? – What happens when the economy expands?
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Evidence on Business Cycles and Interest Rates Chapter 7 Term Structure of Interest Rates Hold risk constant look at difference in yields across maturity Risk Structure of Interest Rates – Hold maturity constant look at difference in yields across risk Risk Analysis – Duration (will come in an additional reading
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14-Term Structure - Class Business Current Events Homework...

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