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# FIN722 GDB No. 1 Solution and Discussion Spring 2017 Due Date: May 02, 2017

FIN722 GDB No. 1 Solution and Discussion Spring 2017 Due Date: May 02, 2017

FIN722 - Corporate Finance GDB No. 1 Solution and Discussion Spring 2017 Due Date: May 02, 2017

Corporate Finance (FIN722)

Dear Students!

This is to inform that Graded Discussion Board (GDB) No. 01 will be opened on April 25, 2017 for discussion and last date for posting your discussion will be May 02, 2017

Term Structure of Interest Rates

Learning Objective:

By attempting this GDB, students will be able to differentiate between term structure of interest rates and the yield curve.

Term structure of interest rate generally illustrates the relationship between short term and long term interest rates. More specifically, it tells us the relationship of nominal interest rate on a default free, pure discount bond with its time to maturity.  Three factors that determine the shape of term structure are real rate of interest, inflation rate and interest rate risk.

Yield curve and term structure of interest rates are considered almost same things. However, both are different in the sense that yield curve is based upon Coupon Bond yields while term structure is based upon Pure Discount Bonds with no coupon payments. Due to this, shape of yield curve is dependent upon three additional factors other than those which construct term structure of interest rate.

Required: What are these three factors and why are these considered important to determine yield curve, however, irrelevant to term structure? Justify your answer by providing appropriate reasoning.

Important Instructions:

• Your discussion must be based on logical reasoning and to the point. Avoid irrelevant discussion and unnecessary information
• Do not copy or exchange your answer with other students.  Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.
• Books, websites and other reading material may be consulted before posting your comments; but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0) even if you provide references.
• Obnoxious or ignoble answer should be strictly avoided.
• Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB.

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### Replies to This Discussion

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Dear what is the irrelevant to term structure?

liqudity premium is part of this DDB ?

Please share idea solution time is less

Factors

Dear Students Don’t wait for solution post your problems here and discuss ... after discussion a perfect solution will come in a result. So, Start it now, replies here give your comments according to your knowledge and understandings....

idea sol plzzz

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