Chapter 8
1)
Which of the following statements concerning yield curve shifts is FALSE?
a.
A twist results in a flatter or steeper yield curve
b.
A parallel shift results in all yields changing by the same amount in the
same direction
c.
A butterfly shifts result in a change in curvature
d.
A positive butterfly shift results in more curvature
2)
Of the three factors that have been observed to affect Treasury returns, which is
the most important? Changes in the:
3)
Suppose you observe a 1year (zero coupon) Treasury security trading at a yield
to maturity of 5% (price of 95.2381 percent of par). You also observe a 2year T
not with a 6% coupon trading at a yield to maturity of 5.5% (price of 100.9232).
And, finally, you observe a 3year Tnote with a 7% coupon trading at a yield to
maturity of 6.0% (price of 102.6730). Assume annual coupon payments. Use the
bootstrapping method to determine the 2year and 3year spot rates.
2year spot rate
3year spot rate
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 Spring '12
 india
 Interest Rates, Yield Curve

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