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Use the ‘Liquidity Premium Theory’ to explain the shape of the yield curve.
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- Explain an upward sloping yield curve using the pure expectation theory.Describe what the zero-coupon yield curve measures. Quickly sketch what you expect the likely shape of this curve to be in normal economic conditions, and explain why.Explain a flat yield curve using the segmented market theory.
- A special case of the Internal Rate of Return (IRR) is the Yield to Maturity (YTM). Explain how the YTM is used to calculate the yield curveHow do you solve for the rate of return using the yield to maturity formula?A special case of the Internal Rate of Return (IRR) is the Yield to Maturity (YTM). Explain how the YTM is used to calculate the yield curve and why investors track moves in the yield curve.
- why investors track moves in the yield curve?Explain how a yield curve is constructed and what its shape reveals about interest rates.A special case of the Internal Rate of Return (IRR) is the Yield to Maturity (YTM). Explain how the YTM is used to calculate the yield curve and why investors track moves in the yield curve. I would appreciate a long response and the post attention to be paid on why investors track moves in the yield curve.