Yield curve - influence the rate of interest, Financial Management

Assignment Help:

Q. Yield curve - influence the rate of interest?

The normal yield curve demonstrates that the yield required on debt increases in line with the term to maturity. One reason for this is to facilitate loan providers requires compensation for deferring their use of the cash they have lent and the longer the period for which they are deprived of their cash the more compensation they require. This is explaining as the liquidity preference explanation for the shape of the normal yield curve.

Other explanations for the form of the normal yield curve are expectations theory and market segmentation theory. Expectations theory proposes that interest rates rise with maturity because rates of interest are expected to rise in the future for example due to an expected increase in inflation. Market segmentation theory proposes that the market for long-term debt differs from the market for short-term debt.


Related Discussions:- Yield curve - influence the rate of interest

Standard deviation for every project, AOT limited is considering two mutual...

AOT limited is considering two mutually exclusive projects - cable and satellite.  The possible NPVs for every project and their associated probabilities are as follows: Cable:

Building blocks of a pass-through security, The main aim of securitiz...

The main aim of securitization that was initiated in the late sixties was to resolve problems of mismatch and protect the US mortgage financing system from macroe

Define the explicit cost of capital, Define the Explicit cost of capital ...

Define the Explicit cost of capital Explicit cost of retained earnings that involve no future flows to or from firm is minus 100 per cent. This must not tempt one to infer that

Show the sales forecasting, A niche market targets a well-defined and speci...

A niche market targets a well-defined and specific market segment. Firms that operate in niche markets will therefore cater for the precise and distinct needs of their customers. D

The chinese pension fund system, The Chinese Pension Fund System Mainlan...

The Chinese Pension Fund System Mainland China has a rapidly aging population. This is attributable to two main factors - the one-child policy plus substantial improvements in l

Fiancial management, Ashok is to receive an amount of Rs. 15,00,000 from hi...

Ashok is to receive an amount of Rs. 15,00,000 from his relative after 3 years. He wants to buy a house for which he wants the money to be paid now. His relative had already invest

Operating cycle, how can an operating cycle be applied to a poultry busines...

how can an operating cycle be applied to a poultry business

Net present value of of the investment, Air Manchester (AM) is a new ...

Air Manchester (AM) is a new airplane manufacturer. It is considering investing in a software package, e.g. SAS, which would make its daily operations more efficient

Eoq inventory model primary variable, What are the primary variables being ...

What are the primary variables being balanced in the EOQ inventory model?  Explain The primary variables mortal balanced in the EOQ model are ordering costs and carrying costs.

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