Explain the risk structure of interest rates and what are

Reference no: EM13392589

What is the risk structure of interest rates? And, what are the three major components that are included? What is the term structure of interest rates, and its three facts? If the default risk of corporate bonds decreases, what will happen to the demand for corporate bonds, the price of corporate bonds, the demand for treasuries, and the price for treasuries? Also, explain what direction the demand curve moves for corporate bonds and treasuries (either to the left or to the right). Yearly rates are 4%, 5%, 6%, 7%, and 8% for the next five years. Please compute and explain the expected interest rate for both the three and four-year bonds if we show the liquidity premiums to be 1.25%, 1%, .75%, .5%, and 0%. (Show your work/calculations/formulas.)

Reference no: EM13392589

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