State expectations theory of term structure of interest rate, Financial Management

Assignment Help:

State the expectations theory of the term structure of interest rates.

Expectations theory:

The expectations theory of the term structure of interest rates specifies that into equilibrium, each long-term rate is a geometric average of today’s short term rate and usual short-term rates in the future.

This theory needs that there is an implicit relationship in between forward rates and current bond yields. The forward rate of interest is the rate of interest which will be payable onto funds beginning at any future date.


Related Discussions:- State expectations theory of term structure of interest rate

Financial management in marketing department, Q. Financial Management in Ma...

Q. Financial Management in Marketing Department? The marketing department of a firm is concerned with the ultimate activity of the firm Le. the selling of goods and services to

Fundamentals of structured product engineering, Fundamentals of Structured ...

Fundamentals of Structured Product Engineering 1. (a) Let r m denote the m month swap rate (or Libor rate). Subsequently the 3 × n month forward rate f (3 ×n )

What is the time value of money, What is the time value of money? The t...

What is the time value of money? The time value of money signifies that money you hold in your hand today is worth more than money you expect to receive in the future. Likewise

Illustration of valuation using multiple discount rates, Illustration  ...

Illustration  Let us assume that Vishal Mehta & Co., (from Illustration 1) is using the following discounting rates in place of one rate:

Expalin term commercial banks in financial system, Commercial banks Com...

Commercial banks Commercial banks allow deposits liabilities to make loans assets as well as to buy government securities. Deposits are wider in range including checkable depos

What are the disclosure requirements, Disclosure requirements · Common...

Disclosure requirements · Common information about how operating segments were identified and types of products and services from which every operating segment derives its rev

Define foreign exchange transaction among international bank, How are forei...

How are foreign exchange transactions between international banks settled? Answer:  a network of correspondent banking relationships is known as the interbank market with large c

Explain the concept of newsworthiness in the field of pr, Question 1: (...

Question 1: (a). A big multinational company wishes to employ a PR manager for all its PR activities. What according to you would be the advantages and disadvantages of having

Bond Valuation, The Pennington Corporation issued a new series of bonds on ...

The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in 30 years, on December 31,

Explain difference between business risk and financial risk, What is the di...

What is the difference between business risk and financial risk? Business risk refers to the improbability a company has with regard to its operating income also known as earni

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd