The chart below shows the US Treasury Yield Curve as of December 16, 2021 (see below). 1 Mo 0.04% 2 Mo 0.06% 3 Mo 0.05% 6 Mo 0.13% 1 Yr 0.26% 2 Yr 0.64% 3 Yr 0.92% Date 12/16/2021 5 Yr 1.19% 7 Yr 1.36% 10 Yr 1.44% 20 Yr 1.91% 30 Yr 1.87% Based on the Treasury Yield Curve shown above, answer the following two questions: A) What unusual feature presents itself in the curve? Please be specific. B) Using the liquidity premium theory, what is your forecast of the 10-year rate, 10 years from today? Assume the the 10-year liquidity premium is 0.30% and that the 20-year liquidity premium is 0.70%.

The chart below shows the US Treasury Yield Curve as of December 16, 2021 (see below). 1 Mo 0.04% 2 Mo 0.06% 3 Mo 0.05% 6 Mo 0.13% 1 Yr 0.26% 2 Yr 0.64% 3 Yr 0.92% Date 12/16/2021 5 Yr 1.19% 7 Yr 1.36% 10 Yr 1.44% 20 Yr 1.91% 30 Yr 1.87% Based on the Treasury Yield Curve shown above, answer the following two questions: A) What unusual feature presents itself in the curve? Please be specific. B) Using the liquidity premium theory, what is your forecast of the 10-year rate, 10 years from today? Assume the the 10-year liquidity premium is 0.30% and that the 20-year liquidity premium is 0.70%.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 33QA

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