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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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Suppose you have noticed that the slope of the corporate yield curve has become steeper over the past few months. What factors might explain the change in the slope?

Summary Introduction

To identify: The factors which affect the slop.

Introduction:

Yield Curve:

The graphical representation of expected return, provided by the company to its investors during the years is known as yield curve.

Explanation
  • Expectation in regards of the future inflation affects the slop of the yield curve. The expected high inflation leads to the higher interest rate and low inflation leads to the lower interest rate.
  • Maturity risk premium increases with the increment of time duration of the securities...

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