Go to http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/. Based on the most recently...

Question

Go to http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/. Based on the most recently released daily data (i.e., the data released on the day when you work on this assignment), complete parts a and b below:

a. Bank prime loan charges 3.75% currently. Find yield for 12-month Treasury bills from the Bloomberg website and indicate the size of current default risk premiums for bank prime loans.

b. Prepare a yield curve or term structure of interest rates based on today’s yields on U.S. Treasury securities. Briefly comment on the shape of current yield curve (i.e., is it normal or inverted? Steep or flat? What does it tell you about the current status of the US economy?)

David · Accepted Answer

a. Based on the most recently released data,
Yield for 12 months Treasury bills =  0.77% 
Bank prime loan charges   = 3.75%
Default risk premium is the additional amount that is required to be paid by the borrower to 
lender in order to compensate for the risk assumed by the lender. It is recovered by the lender 
indirectly in the form of higher rates of interest at which the loan is provided by the lender.
Default risk Premium  = Bank prime lending Charges – Treasury bill yield 
     = 3.75% - 0.

Go to http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/. Based on the most recently released daily data (i.e., the data released on the day when you work on this assignment ), complete...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment