Ch 13 - The term structure of interest rates Flashcards
1
Q
What is yield to maturity?
A
The return when a bond is held to maturity
2
Q
What the a yield curve?
A
A plot of the yield to maturity of a bond against its time to maturity
Also known as the term structure of interest rates
3
Q
Why do policymakers not set long term int rates?
A
Due to the possibility of large capital losses
4
Q
There exists an ______ relationship between bond prices and int rates
A
Inverse
5
Q
Liquidity premium =
A
Illiquid bond YTM - liquid bond YTM
