Do you want BuboFlash to help you learning these things? Or do you want to add or correct something? Click here to log in or create user.

Tags

#finance #steiner-mastering-financial-calculations-3ed

Question

a "flat" short-term yield curve - in our example, the 3-month and 6-month rates are the same at 10.0% - does it imply that the market expects interest rates to remain **stable**?

Answer

No, it implies the market expects rates to **fall** (geometric average, reinvestment; also rate compounded twice has to be smaller than equivalent non-compounded rate over the same period). In other words, 6 month is equivalent to 3 months from now (known) and next 3 months unknown. for this compounding to work out to 10%, next 3 months (unknown) must be lower than 10%.

Tags

#finance #steiner-mastering-financial-calculations-3ed

Question

a "flat" short-term yield curve - in our example, the 3-month and 6-month rates are the same at 10.0% - does it imply that the market expects interest rates to remain **stable**?

Answer

?

Tags

#finance #steiner-mastering-financial-calculations-3ed

Question

a "flat" short-term yield curve - in our example, the 3-month and 6-month rates are the same at 10.0% - does it imply that the market expects interest rates to remain **stable**?

Answer

No, it implies the market expects rates to **fall** (geometric average, reinvestment; also rate compounded twice has to be smaller than equivalent non-compounded rate over the same period). In other words, 6 month is equivalent to 3 months from now (known) and next 3 months unknown. for this compounding to work out to 10%, next 3 months (unknown) must be lower than 10%.

If you want to change selection, open original toplevel document below and click on "Move attachment"

#### Parent (intermediate) annotation

**Open it**

a "flat" short-term yield curve - in our example, the 3-month and 6-month rates are the same at 10.0% - does not imply that the market expects interest rates to remain stable. Rather, it expects them to fall.

#### Original toplevel document (pdf)

owner: piotr.wasik - (no access) - Mastering Financial Calculations 3ed (Steiner), p93

a "flat" short-term yield curve - in our example, the 3-month and 6-month rates are the same at 10.0% - does not imply that the market expects interest rates to remain stable. Rather, it expects them to fall.

status | not learned | measured difficulty | 37% [default] | last interval [days] | |||
---|---|---|---|---|---|---|---|

repetition number in this series | 0 | memorised on | scheduled repetition | ||||

scheduled repetition interval | last repetition or drill |

Do you want to join discussion? Click here to log in or create user.