The term structure of interest rates has been well documented over the years. The curve shows that as investment maturation increases in time, in other words, say from 1 year to 10 years until maturation, interest rates normally increase. In 1981 however, the term structure of interest rates showed a downward slope, not it's usual upward slope. In other words, the curve suggested that the further in the future we went interest rates would go down. What do you believe was the historical cause for this?
The term structure of interest rates has been well documented over the years. The curve shows that as investment maturation increases in time, in other words, say from 1 year to 10 years until maturation, interest rates normally increase. In 1981 however, the term structure of interest rates showed a downward slope, not it's usual upward slope. In other words, the curve suggested that the further in the future we went interest rates would go down. What do you believe was the historical cause for this?
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
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The term structure of interest rates has been well documented over the years. The curve shows that as investment maturation increases in time, in other words, say from 1 year to 10 years until maturation, interest rates normally increase. In 1981 however, the term structure of interest rates showed a downward slope, not it's usual upward slope. In other words, the curve suggested that the further in the future we went interest rates would go down. What do you believe was the historical cause for this?
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