What are the problems with using only on-the-run Treasury issues to construct the theoretical spot rate curve?
Answer to relevant QuestionsWhen all Treasury issues are used to construct the theoretical spot rate curve, what methodology is used to construct the curve? .“Forward rates are poor predictors of the actual future rates that are realized. Consequently, they are of little value to an investor.” Explain why you agree or disagree with this statement. A client observes that a corporate bond that he is interested in purchasing with a triple A rating has a benchmark spread that is positive when the benchmark is U.S. Treasuries but negative when the benchmark is the LIBOR ...What are the differences among a Treasury bill, Treasury note, and Treasury bond? The following questions are about Treasury Inflation Protected Securities (TIPS). (a) What is meant by the “real rate”? (b) What is meant by the “inflation-adjusted principal”? (c) Suppose that the coupon rate for a ...
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