Consider that today’s annualized interest rates on three-year securities are 8 percent and 6 percent respectively. You can only use this information for a two-year forecast of the one year forward rate.
A one-year municipal bond yielding 6% and a corporate bond yielding 9% are two options. Which one should you choose if your marginal federal income tax is 20% and there are no differences between the two securities?
Consider that one-year interest rates on securities will be 3 percent today and 6 percent in one year. 7 percent is predicted for two years. If you only believe in pure expectations, then what is the current interest rate on three-year and two-year securities today?
Define some variables that can influence the yield curve’s shape. Explain how the yield curve is used by financial market participants to help them make their decisions.
Consider the possibility of rising interest rates. Which effect would that have on the structure of the interest rate curve? Explain.
Identify the main objectives and methods that the Federal Open Market Committee attempts to accomplish these goals.
The Beige Book: What does it mean and what do the market players think about it?
Does Congress or the Fed have the authority to decide the fates of financial institutions nearing bankruptcy?
Do equity securities prices reflect the Federal Reserve’s direct or indirect influence? Your response indicates that equity market participants are more focused on the current Fed actions than on expected Fed moves when pricing equity securities.
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