Posted: February 22nd, 2022
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Graded Discussion Week 4
Yield curves and interest rates
Please note that if you edit your initial response (Original Post), you will not get credit for the Original Post. The discussions are set up as “Must post first”.
The yield curve is a graph of the term structure of interest rates, which is the relationship of yield and maturity for securities of similar risk. When we think of the yield curve we typically think of the Treasury yield curve, as found each day in financial publications like the Wall Street Journal. The yield curves shape and level change due to a variety of monetary, economic, and political factors.
for this discussion we will be using the Treasury.gov website. It is useful site for obtaining actual Treasury yield data:
From this web page, choose the year and click Go
1. Create the table with the interest rates data for Treasury yield curves for the following six days. (You can simply copy-paste the dates for these date). Present the data in your response (required).
You may want to create the graphs in Excel and present in your response. (It is not required, however it is very helpful).
03/31/93
03/30/98
03/28/02
12/15/08
03/29/19
03/25/2020
2. In your response please answer the following questions:
Knowing what the components of the 3-month Treasury bill are, what could explain the large variation in the 3-month risk-free rate over the different time periods?
Contrast the yield curves data of March 1993 and March 1998. Notice that the 1998 yield curve is almost flat, it has very little slope, while the 1993 yield curve has a very steep slope. What could account for this difference in slopes?
Contrast the yield curves data of March 2002 and December 2008. What could account for this difference? What does the March 2002 yield curve say about long-term versus short-term interest rates? What does the 2008 yield curve say about long-term versus short-term interest rates?
Contrast the slopes of the March 2002 yield curve with that of March 2019. What do we call a yield curve that possesses the shape of the March 2019 yield curve? Why might the March 2019 yield curve be downward sloping? What does this indicate?
Compare interest rates of December 2008 yield curve with that of March 2020. What does this indicate?
Reflection the students also should include a paragraph in the initial response in their own words, using finance terminology, reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace or in everyday life.
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