Case

Case

  • Submitted By: crecord
  • Date Submitted: 07/05/2015 5:21 PM
  • Category: Business
  • Words: 828
  • Page: 4












Case 5














TABLE OF CONTENTS

I. Case 5, Ch. 9 – What’s on the Web?…….…………………………….…….…….3
II. Concept Questions…………………………………………………………………4
III. Questions and Problems…………………………………………………………...5


























I. Case 5 – What’s on the Web?



1. Yield Curve What is the shape of the Treasury yield curve today? Go to www.bloomberg.com and find out? Is the yield curve upward sloping or downward sloping? According to the expectations theory, are interest rates in the future expected to be higher or lower than they are today?

A downward sloping yield curve is also called an inverted yield curve associated with lower interest rates and a recession. The yield curve is downward sloping, the expectation is that yields will be lower in the future.




2. STRIPS Go to www.treasurydirect.gov and search the site for STRIPS to find information on Treasury STRIPS. Answer the following questions: Which Treasury securities are eligible to be stripped? What are minimum par amounts for stripping? How do I buy STRIPS? Why do investors hold STRIPS?

Any Treasury issue with a maturity of 10 years or longer is eligible for the STRIPS process. The minimum face amount needed to strip a fixed principal note or bond is $100 and any par amount to be stripped above $100 must be in a multiple of $100. Strips are not issued or sold directly to investors. STRIPS can be purchased and held only through financial institutions and government securities brokers and dealers. STRIPS let investors hold and trade the individual interest and principal components of eligible Treasury notes and bonds as separate securities. Investors hold STRIPS to receive a known payment on a specific date.












II. Concept Questions

3. Fed Funds versus the Discount Rate (L01, CFA5) Compare and contrast the Fed funds rate and the discount rate. Which do you think is more...

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