32. The following graph is showing an upward sloping New Zealand treasury yield curve.Which of the following statements are correct about the yield curve and the determinants ofbond yields?NZD NEW ZEALAND SOVEREIGN 97) Actions 98) TableX-axis TenorY-axis YieldPCS MULTSpecific mm/dd/yyy Relative Last 1D 1W 1M Modify1992 New and Severin ve 12/06/14 17:25:52380150Curve ID149I.II.III.a.b.MC.d.e.1133M3.4203761Y3.535TenorII only.III only.I and II only.I and IV only.II and III only.3Y3.524NLower Chart Table* Curves & Relative ValueSY3.608vGraph Curves7Y3.630ⒸLong-term treasury bonds are not a better investment than the short-term treasurybonds. The extra rate of return is an indication of investors wanting morecompensation due to longer-term bonds having a much greater risk of lossresulting from changes in interest rates than do shorter-term bonds.IV. Long-term treasury bonds are giving a higher yield than the short-term treasurybonds because of a greater chance of default.10Y3.688Long-term treasury bonds are better investments than short-term treasury bondsbecause the 10-year Government bond is currently giving 3.688% p.a. which is ahigher rate of return than the 1-year Government bond.Investors are expecting a higher inflation outlook further out into the future thanthe level of inflation now.

An term structure shows the yield or return of short term debts and long term debts with the same…

Answered: 32. The following graph is showing an…

32. The following graph is showing an upward sloping New Zealand treasury yield curve. Which of the following statements are correct about the yield curve and the determinants of bond yields?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter9: Forecasting Exchange Rates

Section: Chapter Questions

Problem 17QA

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