As of November 14, 2023, Treasury yields were as follows: 1-year 5.24% 2-year 4.80% 3-year 4.56% 5-year 4.42% 10-year 4.44% 30-year 4.61% Use these yields to answer the questions below. a. What do the rates above imply about the shape of the yield curve? Explain. b. Using the pure expectations theory of the term structure of interest rates, carefully explain how the general shape of the yield curve described in (a) could come about.
As of November 14, 2023, Treasury yields were as follows:
1-year 5.24%
2-year 4.80%
3-year 4.56%
5-year 4.42%
10-year 4.44%
30-year 4.61%
Use these yields to answer the questions below.
a. What do the rates above imply about the shape of the yield curve? Explain.
b. Using the pure expectations theory of the term structure of interest rates, carefully explain how the general shape of the yield curve described in (a) could come about.
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