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Author Question: Draw a graph of a typical Treasury yield curve and discuss why it usually takes that shape. What ... (Read 111 times)

dmcintosh

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on: Jul 11, 2018
Draw a graph of a typical Treasury yield curve and discuss why it usually takes that shape.
 
  What will be an ideal response?

Question 2

Which of the following is true of risk premium?
 
  A) T-bills have a have a higher risk premium than that of Treasury bonds.
  B) The government bonds have a higher risk premium than that of corporate bonds.
  C) The speculative corporate issues have a lower risk premium than that of the higher rated corporate issues.
  D) The lower-rated corporate issues have a higher risk premium than that of the higher rated corporate issues.


succesfull

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Reply #1 on: Jul 11, 2018
Answer to Question 1

The student should draw a normal, upward-sloping yield curve as shown in the text. Factors impacting the shape of the yield curve are the risk free rate, the inflation premium, and the interest rate risk premium.

Answer to Question 2

D


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