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Differences in Interest Rates
MPA 620: Financial Toolkit
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Risk Structure of Interest Rates
Assumptions and Conditions Same maturity Premiums Default Risk Taxability Liquidity
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Term Structure Structure of Interest Rates
Assumptions and Conditions Same Default Risk Same Taxability Premiums Interest Rate Risk Inflation Risk Liquidity
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Example 1 3 month US Treasury Bill: 0.63%
30 Year US Treasury Bond: 3.07%
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Example 2 30 year Municipal Bond: 3.14%
30 Year US Treasury Bond: 3.07%
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Example 3 10 year Corporate Bond Aaa: 3.91%
10 year Corporate Bond Baa: 5.32% 10 Year US Treasury Bond: 3.08%
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