Question
1) If the Treasury yield curve is flat (horizontal), can we say that the investors expect that the inflation rates will go down in the
1) If the Treasury yield curve is flat (horizontal), can we say that the investors expect that the inflation rates will go down in the future? Please state: Agree, disagree, or uncertain. 2) If the inflation rates are expected to stay the same (at the level we have now) in the future, we can conclude that the yield curve is flat (horizontal). Please state: Agree, disagree, or uncertain. 3) If the inflation rates are expected to go down in the future, then the yield curve should be down-sloping. Please state: Agree, disagree, or uncertain. 4) Is it possible to see that the inflation rate is expected to decline in the future but the yield curve is upsloping? 5) On the Treasury yield curve, if the yield of 1Y Treasury is 2%, and 10Y Treasury is 3.4%, then can we say that the maturity risk premium for 10Y bond must be 1.4%? 6) If we were given a corporate spread for AAA bond as 1.4%, can we produce the yield curve for AAA bonds simply assuming a vertical distance of 1.4% over the Treasury yield curve? 7) What do you think is the best way to calculate the Maturity Risk Premium?
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