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Unformatted text preview: 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: a. Slope of the yield curve b. Curvature of the yield curve c. Level of interest rates d. Duration of on-the-run Treasury securities 3) Suppose you observe a 1-year (zero coupon) Treasury security trading at a yield to maturity of 5% (price of 95.2381 percent of par). You also observe a 2-year T- not with a 6% coupon trading at a yield to maturity of 5.5% (price of 100.9232). And, finally, you observe a 3-year T-note 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 2-year and 3-year spot rates....
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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.
- Spring '12