Term structure of interest rates The following yield data for a number of highest-quality corporate bonds existed at each of the three points in time noted in the following table: a. On the same set of axes, draw the yield curve at each of the three given times. Select the graph that correctly represents the yield curves associated with the data in the table. b. Label each curve in part a with its general shape (downward-sloping, upward-sloping, flat). c. Describe the general interest rate expectation existing at each of the three times, assuming expectations theory holds. d. Examine the data from 5 years ago. According to the expectations theory, what approximate return did investors expect a 5-year bond to pay as of today? a. On the same set of axes, draw the yield curve at each of the three given times. Which graph correctly represents the yield curves? (Select the best answer below.) OA. B. O C. 20 20 2 yrs ago 157 Today Today 20- 5 yrs ago 157 2 yrs ago 15 5 yrs ago Today Yield % 10 100 Yield % 100 Yield % 1010 5 yrs ago 2 yrs ago Today 5- 5- 57 07 0- 0 07 0 10 20 30 Time to Maturity (years) 10 20 30 Time to Maturity (years) 10 20 30 Time to Maturity (years) X i Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Yield Time to maturity (years) 5 years ago 2 years ago Today 3 5 10 15 9.9% 9.9 10.1 10.3 10.2 10.3 10.1 16.2% 14.4 13.8 12.5 12.3 12.1 12.1 10.1 % 10.6 11.7 13.4 13.5 13.7 14.3 20 30 Print Done Term structure of interest rates The following yield data for a number of highest-quality corporate bonds existed at each of the three points in time noted in the following table: a. On the same set of axes, draw the yield curve at each of the three given times. Select the graph that correctly represents the yield curves associated with the data in the table. b. Label each curve in part a with its general shape (downward-sloping, upward-sloping, flat). c. Describe the general interest rate expectation existing at each of the three times, assuming expectations theory holds. d. Examine the data from 5 years ago. According to the expectations theory, what approximate return did investors expect a 5-year bond to pay as of today? a. On the same set of axes, draw the yield curve at each of the three given times. Which graph correctly represents the yield curves? (Select the best answer below.) OA. B. O C. 20 20 2 yrs ago 157 Today Today 20- 5 yrs ago 157 2 yrs ago 15 5 yrs ago Today Yield % 10 100 Yield % 100 Yield % 1010 5 yrs ago 2 yrs ago Today 5- 5- 57 07 0- 0 07 0 10 20 30 Time to Maturity (years) 10 20 30 Time to Maturity (years) 10 20 30 Time to Maturity (years) X i Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Yield Time to maturity (years) 5 years ago 2 years ago Today 3 5 10 15 9.9% 9.9 10.1 10.3 10.2 10.3 10.1 16.2% 14.4 13.8 12.5 12.3 12.1 12.1 10.1 % 10.6 11.7 13.4 13.5 13.7 14.3 20 30 Print Done
