Question
A firm wishing to evaluate interest rate behavior has gathered yield data on five U.S. Treasury securities, each having a different maturity and all measured
A firm wishing to evaluate interest rate behavior has gathered yield data on five U.S. Treasury securities, each having a different maturity and all measured at the same point in time. The summarized data follow.
U.S. Treasury Security Time to Maturity Yield
A 1 Year 12.6%
B 10 Years 11.2%
C 6 months 13.0%
D 20 Years 11.0%
E 5 Years 11.4%
- Draw the yield curve associated with these data.
- Describe the resulting yield curve in part a, and explain what it says about the direction of future interest rates under the expectations theory.
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