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Assume that yields on U.S. Treasury securities were as follows: RATE TERM 6 months 4.58% 5.33 5.64 5.79 1 year years years 4 years 5
Assume that yields on U.S. Treasury securities were as follows: RATE TERM 6 months 4.58% 5.33 5.64 5.79 1 year years years 4 years 5 years 10 years 5.82 6.04 6.38 6.53 20 years 30 years 6.78 a. Select a correct yield curve based on these data. Interest Rate (%) 5 10 15 20 25 Years to Maturity B Interest Rate (%) 5 10 15 20 25 Years to Maturity Interest Rate (%) 5 10 15 20 25 Years to Maturity D Interest Rete (%) 5 10 15 20 25 Years to Maturity The currect yield curveis - Select b. What type of yield curve is shown? -Selart c. What Information does this graph tell you? Set d. 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 end renew the loan or borrow long term? Explain. 1. Even though the barrier reinvests in increasing short-term rates, these rates are still below the long-term rate, but what makes the higher long-term rate attractive is the rollover risk that may possibly occur if the short-term rates go even higher than the long-term rate (and that could be for a long timel). *** II. Generaly, it would make sense to borron short-term because each year the loan is renewed the interest rate would be higher. III. Generaly, it would make sense to borron short-term because each year the loan is renewed the interest rate would be lower. IV. General, it would make sense to borrow long-term because each year the Icen is renewed the interest rate would be lower Differences in yields that may exist between the short-term and long-term cannot be explained by the forces of supply and demand in each market. Selv
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