Homework: The Risk and Term Structure of Interest Rates
i. What is the difference between default risk bond and default risk-free bond, and how do you calculate the risk premium for any security?
ii. The risk premium has three components or parts, list all the three and define each one of them
iii. Define the term structure of interest rate theory.
iv. Three theories have been put to explain the term structure of interest rate in your textbook, name those three theories, and define each one of them in a small paragraph.
v. Define the pure expectation theory, what it's main conclusion ?
Format your homework according to the following formatting requirements:
i) The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
ii) The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
iii) Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.