Question


What is a yield curve? What factors affect the shape of a yield curve?

Homework Answers

Answer #1

Yield curve is a plot between the interest rates and different maturities of bonds.It is an indicator about future changes in the economy and bond prices. There are 3 types of yield curves. 1.Normal Yield Curve 2. Flat Yield Curve 3. Inverted Yield Curve

Factors affecting shape of a yield curve:
Maturity of the bonds, the interest rate expectation, liquidity premium , and the demand and supply of the bonds affect the shape of the yield curve, the ecxonomic condition of the country also plays a role in it.

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