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Yield Curve and Bond Valuation - Math Problem Example
Finance & Accounting
Pages 5 (1255 words)
Based on the information retrieved from the Board of Governors of the Federal Reserve System on a 1-month business day, the following information concerning historical dairy interest rates on the U.S treasury was obtained. …
Whereby, if that date was not a business date the preceding date was selected as shown in the table below. Business Date chosen Five Years Ago 1st January 2007 1-month Nominal T-bill Rate on that date 5.02% 3--month Nominal T-bill Rate on that date 4.79% 6-month Nominal T-bill Rate on that date 5.11% 1-year Nominal T-note Rate on that Date 5% 5-year Nominal T-note Rate on that Date 4.68% 10-year Nominal T-note Rate on that Date 4.68% 20-year Nominal T-note Rate on that Date 2.68% 30-year Nominal T-note Rate on that Date 0.81% The yield curve in action: US Treasuries, 1St Februry2007 Yields 6% 5.5% 5% 4.5% 4 % 3.5% 3% 2.5% 2% 1.5% 1% 0.5% 1m 3m 6m 1yr 10yrs 30yrs maturity Source: Author 3. on your selected date what was the yield curve rising, falling, or flat? What explanation would you give for this shape? Between the first months to the third month, there was a slight fall on yield. The yield started rising slightly by the end of sixth month. Additionally, another decline was scrutinized between sixth month maturities the fast year. ...
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