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Unformatted text preview: face value and coupon payment , but a maturity of 5 years. If interest rates on newly issued bonds increased, which bond price would be affected more: the 5 year bond, or the 10 year bond? Explain. iv) Consider a bond with a positive yield to maturity . If interest rates rise, this bond could give a negative rate of return . True or False. Explain. v) Explain the difference between a real and a nominal interest rate. Why do we need two different notions of the interest rate? vi) What is the yield curve ? vii) Explain the expectations theory of the yield curve . viii) Explain why the yield curve can be used as a forecaster of future recessions....
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- Fall '08
- Interest Rates