Chapter 4 - 1. 2. 3. 4. 5. Chapter 4 Understanding Yield...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Chapter 4 – Understanding Yield Spreads 1. In implementing monetary policy, the fed can use one of the following interest rate policy tools: 1. Open market operations (buying or selling treasuries, fx etc.) 2. Discount rate – banks borrow on a collateralized basis at the fed’s window 3. Bank reserve requirements (tighten policy by increasing and loosen by decreasing) 4. Verbal influence to control how bankers supply credit to businesses and consumers 2. Yield curve is the graph depicting treasury yields to its appropriate maturity. Some of the shapes of the yield curve are: upward sloping, inverted and flat. Bloomberg. 3. Theories of the term structure of interest rates: 1. Pure Expectations Theory - 2. Liquidity Preference Theory 3. Market Segmentation Theory 4. Credit spreads: Yield spread between a corporate bond and a treasury security of similar maturity and characteristics is defined as ‘credit spread’. Credit spreads
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/04/2012 for the course ECON 313 taught by Professor India during the Spring '12 term at University of San Francisco.

Page1 / 11

Chapter 4 - 1. 2. 3. 4. 5. Chapter 4 Understanding Yield...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online