A firm wishing to evaluate interest rate behavior has gathered yield data on five U.S....
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Accounting
A firm wishing to evaluate interest rate behavior has gathered yield data on five U.S. Treasury securities, each having a different maturity and all measured at the same point in time. The summarized data follow:
.a. Select the graph that correctly shows the yield curve associated with the data shown in the table.
b.Describe the resulting yield curve in part a, and explain what it says about the direction of future interest rates under the expectations theory.
U.S. Treasury Security
Time to maturity
Yield
A
1 year
12.6%
B
10 years
11.2%
C
6 months
13.0%
D
20 years
11.0%
E
5 years
11.4%
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