Determine the shape of the yield curve by using an interest rate theory and share your opinion on whether the Australian economy is heading for a boom or for a recession. Explain your choice.
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Determine the shape of the yield curve by using an interest rate theory and share
your opinion on whether the Australian economy is heading for a boom or for a
recession. Explain your choice.
Step by step
Solved in 2 steps with 1 images
- Explore the concept of Hump Shaped Yield Curve covering the following: a. Reasons behind such shape of the yield curve. b. What does it depict or how investors may forsee the economy based on such yield curve. c. A time period in history of any country when the yield curve was hump shaped and the main factors behind it (refrenced section with source).Explain what the yield curve is, what determines its shape, and how you can use the yield curve to help forecast future interest rates.Which investment criteria answers the question: "How quickly do we recover our investment, in nominal dollars?" A) net present value B) internal rate of return C) profitability index D) payback period
- A special case of the Internal Rate of Return (IRR) is the Yield to Maturity (YTM). Explain how the YTM is used to calculate the yield curve and why investors track moves in the yield curve.What factors affect current market interest rate? Why does the slope of the yield curve provide an important clue to the direction of future short-term interest rates?Given the forward rate available to the company, discuss the factors that it should consider at the outset when deciding whether to fix the future interest rate. The word-count for this element should be 500-600 words.A special case of the Internal Rate of Return (IRR) is the Yield to Maturity (YTM). Explain how the YTM is used to calculate the yield curve and why investors track moves in the yield curve. I would appreciate a long response and the post attention to be paid on why investors track moves in the yield curve.
- 1.Explain how the YTM is used to calculate the yield curve 2.why investors track moves in the yield curve.How do you solve for the rate of return using the yield to maturity formula?24) What is the shape of the yield curve given in the following term structure? What expectations are investors likely to have about future interest rates?
- Describe what the zero-coupon yield curve measures. Quickly sketch what you expect the likely shape of this curve to be in normal economic conditions, and explain why.What is the reason for investors to track moves in the yield curve? Please discuss in more depth and maybe more practical examples.Consider the liquidity premium theory. If a yield curve looks like the one shown here, what is the market predicting about the movement of future short-term interest rates? Distinguish between the flat part of the curve and the part with the increasing slope. Yield to maturity Term to maturity