2 Finance 6020 - Homework Given the following Treasury bond yield information, what is the shape of the yield curve? Market Rates Maturity LITE Yield Years Periods 1.00 10.50% 1 year 2.00 10.00% 2 years 3.00 9.50% 3 years 4 years 4.00 8.75% 5 years 5.00 8.00% 10 years 10.00 5.00% 20.00 4.50% 20 years 30 years 30.00 4.00% Based on this yield curve, if you needed to borrow money for longer than 1 year, would it make sense for you to borrow short term and renew the loan or borrow long term? What is the basis point spread (in Bips) between: 5 Year Treasury and a 5 Year BBB-Rated Bond 10 Year Treasury an a 10 Year AA-Rated Bond Yield Years to Maturity Treasury Yield AA-Rated Bond Yield BBB-Rated Bond Yield: 1 5.50% 6.70% 7.40% 2 5.67% 6.89% 7.61% 3 5.82% 7.06% 7.79% 4 5.90% 7.17% 7.92% 5 6.08% 7.38% 8.14% 6 6.20% 7.53% 8.30% 7 6.30% 7.65% 8.44% 6.50% 7.88% 8.68% 6.66% 8.06% 8.88% 6.78% 8.22% 9.06% 6.89% 8.36% 9.21% 6.98% 8.48% 9.35% 8 9 10 11 12 Short or Long