Question
*Could you please, help me explain this in plain terms.* C. Many introductory finance textbooks say, at the beginning of bond valuation problems, Assume the
*Could you please, help me explain this in plain terms.*
C. Many introductory finance textbooks say, at the beginning of bond valuation problems, "Assume the yield curve is flat." Another way of putting this is "Assume the term structure of interest rates is flat." How would this assumption make the questions easier for students of introductory finance to solve?
**For introductory finance students to assume the yield curve is flat will make it easier to calculate the YTM rates. With the yield curve being flat, students can just calculate an ordinary annuity compared without fluctuating inflation rates.***
This is my answer but I don't know if I got the right idea.
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