http://courses.aplia.com/af/servlet/quiz? quiz_action-take Quiz&iqu; Aplia: Stud
ID: 1199989 • Letter: H
Question
http://courses.aplia.com/af/servlet/quiz? quiz_action-take Quiz&iqu; Aplia: Student QuestionCEconomics question | Chegg.c... WIAccount Details Given the indicated maturities listed in the following table, assume the following yields for U.S. Treasury securities Maturity (Years)1 5 10 20 30 Yield (%) 3.6 5.5 5.5 4.2 4.0 On the following graph, plot the yield curve implied by these interest rates. Place a blue point (circle symbol) at each maturity and interest rate in the table, and the yield curve will draw itself. Tool tip: Mouse over the points on the graph to see their coordinates. INTEREST RATE (Percent 10 5 10 5 20 2530 MATURITY (Years The graph's yield curve repres ents yield curve Based on the yield curve shown, which of the following statements is true? O A market with a yield curve as shown on the graph has higher rates on debt securities that mature within 10 to 30 years than those with maturities of less than 1 to 5 years. Interest rates on medium-term maturities are higher than rates on long- and short-term maturities Assume a scenario in which there is no maturity risk premium (MRP= 0), the real nsk-free rate is expected to remain constant, and the yield curve for U.S. Treasury securities is likely to be upward sloping for the next 10 years. Is inflation expected to increase, decrease, or stay the same over the next 10 years? O Stay the same O Decrease O Increase Session Timeout 59:05 12:25 PM 4/8/2016Explanation / Answer
the curve will first increase then constant for on eobservation and then decline.
a) first statement is right as interest is more when securities mature within 10 to 30 years so they are more yielding securities than those which mature from 1 to 5 years.
b). yes, certainly if we are taking 5 or 10 years as medium run than we get 5.5 % interest which is more than short term and long term securities
inflation is expected to increase as real rate= nominal rate - inflation rate so when real rate is constant and nominal rate is increasing thus inflation rate will increase.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.