The chart below shows the US Treasury Yield Curve as of December 16, 2021 (see below). 1 Mo 0.04% 2 Mo 0.06% 3 Mo 0.05% 6 Mo 0.13% 1 Yr 0.26% 2 Yr 0.64% 3 Yr 0.92% Date 12/16/2021 5 Yr 1.19% 7 Yr 1.36% 10 Yr 1.44% 20 Yr 1.91% 30 Yr 1.87% Based on the Treasury Yield Curve shown above, answer the following two questions: A) What unusual feature presents itself in the curve? Please be specific. B) Using the liquidity premium theory, what is your forecast of the 10-year rate, 10 years from today? Assume the the 10-year liquidity premium is 0.30% and that the 20-year liquidity premium is 0.70%.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
The chart below shows the US Ireasury Yield Curve as of December 16, 2021 (see below).
Date
1
1 Mo
2 Mo
З Мо
6 Мо
1 Yr
2 Yr
3 Yr
5 Yr
7 Yr
10 Yr
20 Yr
30 Yr
12/16/2021
0.04%
0.06%
0.05%
0.13%
0.26%
0.64%
0.92%
1.19%
1.36%
1.44%
1.91%
1.87%
Based on the Treasury Yield Curve shown above, answer the following two questions:
A)
What unusual feature presents itself in the curve? Please be specific.
B).
20-year liquidity premium is 0.70%.
Using the liquidity premium theory, what is your forecast of the 10-year rate, 10 years from today? Assume the the 10-year liquidity premium is 0.30% and that the
Transcribed Image Text:The chart below shows the US Ireasury Yield Curve as of December 16, 2021 (see below). Date 1 1 Mo 2 Mo З Мо 6 Мо 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr 12/16/2021 0.04% 0.06% 0.05% 0.13% 0.26% 0.64% 0.92% 1.19% 1.36% 1.44% 1.91% 1.87% Based on the Treasury Yield Curve shown above, answer the following two questions: A) What unusual feature presents itself in the curve? Please be specific. B). 20-year liquidity premium is 0.70%. Using the liquidity premium theory, what is your forecast of the 10-year rate, 10 years from today? Assume the the 10-year liquidity premium is 0.30% and that the
Expert Solution
steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Inflation and Interest Rate
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education