Review Questions for Microeconomic Concepts - 1772 Words

CHAPTER 6 Review Questions: 6-2 What is the term structure of interest rates, and how is it related to the yield curve? Term structure interest rate is a rate which relates the interest rate or rate of return to the time to maturity. The yield curve is a graph of relationship between the debt’s remaining time to maturity and its yield to maturity. Term structure of interest rate can be shown graphically by yield curve. The shape of the yield curve will show the useful ways to future interest rate expectation. 6-3 For a given class of similar-risk securities, what does each of the following yield curves reflect about interest rates: (a) downward-slopping; (b) upward-slopping; and (c) flat? Which form has been historical dominant? For a given class of similar-risk securities, A downward yield curve shows cheaper long-term borrowing lists than the short-term borrowing lists (inverted yield curve). Upward yield curves represent cheaper short-term borrowing lists than the long-term borrowing lists (normal yield curve). The flat one shows similar borrowing costs for both short-term and long-term loans. 6-4 Briefly describe the following theories of general shape of the yield curve: (a) expectation theory; (b) liquidity preference theory; and (c) market segmentation theory. Expectation theory implies that the yield curve reflects investors’ expectation about the future interest rate and inflation. Higher the future inflation rate, higher the long-termShow MoreRelatedReflection on Microeconomics Class998 Words   |  4 PagesReflection on Microeconomics Class Microeconomics is the economic influences that impact at the micro, or firm, rather than macro level. The study of this subject is one that is highly valuable for any studying business with the provision of knowledge that will increase understanding of different influences and support the decision making processes. With the knowledge gained, along with the skills in applying that knowledge developed through class work and exercises for the different modules,Read MoreEconomics : Basic Economic Concepts Essay3027 Words   |  13 PagesKingman Academy of Learning Economics a Social Science Basic Economic Concept Jordan Mcdowell Civics K.David 5 December 2016 . 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The connection between military expenditure and economic growth has been analyzed from several perspectivesRead Moreintermediate accounting 2 test bank Essay8318 Words   |  34 Pagesmeans there’s a very high chance that you will see a very similar, if not exact the exact, question in the test! - The file is either in .doc, .pdf, excel, or zipped in the package and can easily be read on PCs and Macs. - Delivery is INSTANT. You can download the files IMMEDIATELY once payment is done. If you have any questions, please feel free to contact us. Our response is the fastest. All questions will always be answered in 6 hours. This is the quality of service we are providing and we