The paper-bill spread refers to the interest rate spread between commercial paper and Treasury bills with the same maturity. Is this a risk spread or a term spread? How do you expect the paper-bill spread is related to GDP growth? What is the intuition for this result? What does this imply about the yield curve?
What will be an ideal response?
This is a risk spread because it compares the commercial paper yield to a benchmark bond, a U.S. Treasury bill. Since the terms are the same, this is not a term spread. Risk spreads generally increase when GDP growth decreases. This happens because the default risk premium associated with commercial paper increases when economic conditions worsen. This doesn't imply anything about the yield curve per se, because the two bonds have the same terms to maturity.
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Refer to the Article Summary. The convertible peso (CUC) is worth 25 times the peso (CUP), yet Cuban officials have for years treated the two currencies as being of equal value. This indicates that the peso (CUP) is ________ compared to the convertible peso (CUC), and would need to be ________ for the two currencies to reach the market equilibrium exchange rate.
A) overvalued; revalued B) undervalued; devalued C) overvalued; devalued D) undervalued; revalued
The cyclical unemployment rate can never be negative
Indicate whether the statement is true or false
When there are positive externalities associated with the consumption of a good, we can expect the market:
A. demand curve to lie above the social demand curve. B. demand curve to lie below the social demand curve. C. supply curve to lie above the social supply curve. D. supply curve to lie below the social supply curve.
Which of the following laws made "closed shops" unlawful?
A) Taft-Hartley Act B) National Industrial Recovery Act C) National Labor Relations Act D) Railway Workers Act