Hi,

Please respond to my word attachment file for my financial management class.

This week we are discussing about bonds, time value money, and factors that affect market interest rate.

If there is any inquiries, feel free to contact me.

Thx,

PRB432

Discussion board for Finance management class. Please compose substantial responses for the following questions (Minimum word count is 400). Feel free to use any reference such as financial textbook from Brigham and Ehrhardt, 14 th edition or other WSJ, NY Times, or any pertinent online sources (All citations and references should be in APA format). If there is any specific inquiries, please don't hesitate to email me. 1. What does the current Treasury Yield Curve look like today? You can click on this site and compare the yield curves from one period to another: http://www.treasury.gov/resourcecenter/datachartcenter/Pages/index.aspx 2. What does that say about the expectation of interest rates in the future? 3. What does it say about inflation? 4. How does it compare to the yield curve a month ago? 5. A year ago? Now look at the yield curve from November 20, 2006. 6. What was this curve predicting? Reference: Brigham, E. F., & Ehrhardt, M. C. (2014). Financial Management: Theory and Practice (14th ed.). Mason, OH: South-Western Cengage Learning. What does the current Treasury Yield Curve look like today? What is shown are the nominal yield curve and the real yield curves which are indications of believed future market performance along with future interest rates. As of today, the treasury yield curve shows that over the next 30 years, interest rates are expected to increase to about 3%. This upslope in the real and nominal yield curves gives the indication that future short term interest rates are expected to increase. There is a reasonably steep slope in each of the curves which would give the indication that over time, interest rates are expected to increase more aggressively, which would also lead one to believe that the performance in the market would follow suit. What does that say about the expectation of interest rates in the future? Inflation? How does it compare to the yield curve a month ago? A year? The yield curves for January 15, 2016 show a steep increase from where we are today for both of the real and nominal curves. The real curve shows an increase from 0.34% on a 5 year bond to 1.27% on a 30 year bond. The nominal yield curve on the other hand shows a more gradual increase from 1 month to 1 year from 0.19% to 0.49%. After the one year bond, the nominal yield curve increases more rapidly from 0.49% to 2.81% on the 30 year bond. This is an indicator that in the short term, the interest rate will slowly increase showing a little hesitation in the market. In the long run, it is expected that the market will maintain strong performance. When comparing the real and nominal treasury yield curves as of January 15, 2016 to December 15, 2015, you find that the nominal yield curve starts lower (.21%) than today's (.31%). This is before the FED increased interest rates, but the curve also shows a steeper incline in interest rate up to 3% for the 30 year bond, showing that the future outlook for the market is expected to be strong. The real yield curve a month ago is higher than today's real yield curve as well (.49% on a 5 year bond and 1.32% on a 30 year bond). As both the nominal and real numbers are higher than we are seeing today, the outlook and overall confidence in the market a month ago was generally better than what we are seeing today. This can be seen through the slight decrease in predicted interest rates in the yield curves. If you compare January 15, 2015 to January 15, 2016 you will find that the expected future interest rates differ by roughly .3% for the nominal yield curve while the real yield curve is over half a percent. This shows that because the expected interest rate in 2016 is higher than 2015, either the performance of the economy has increased (this is not the case today) or inflation is expected to increase more today than it was a year ago. Now look at the yield curve from November 20, 2006. What was this curve predicting? The treasury yield curve on November 20, 2006 showed a slowly decreasing yield in both the nominal and the real yields. The nominal yield was decreasing from 5.19% to 4.68% for a 30 year bond. The real yield curve showed a decrease from 2.47% to 2.25% from five to twenty year bonds. The decrease in interest rate over time shows that the future market conditions are expected to decrease, thus interest rates would have to decrease as well. The outlook in market conditions was bleak and worrisome for investors which was reflected in the real and nominal yield curves