Question
Q4: In class we discussed the Term Structure of Interest Rates, expressed graphically in what is known as the Yield Curve. Normally the X axis
Q4: In class we discussed the Term Structure of Interest Rates, expressed graphically in what is known as the Yield Curve. Normally the X axis of the Yield Curve is the Term to Maturity (TTM) of the bond, while the required return (Yield) is presented on the Y axis. The Yield Curve itself is usually exclusively determined by Treasury issues. The general shape of the Yield Curve is not always the same, it changes from one point in time to another. The curve may be upward sloping, or downward sloping. One of these shapes is often described as Normal, while the other is described as Inverted. One of these two shapes is generally considered to signal a heightened danger of a coming recession. Which of these two curves is the one that signals danger to the economy?
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