THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 171

CHAPTER 6

The Risk and Term Structure of Interest Rates

139

WEB EXERCISES
1. Go to www.bloomberg.com and click on
Market Data and then Rates & Bonds to find
information about the yield curve in Australia,
Brazil, Germany, Hong Kong, Japan, the United
Kingdom, and the United States. What does each
of these yield curves tell us about the public s
expectations of future movements of short-term
interest rates?
2. Investment companies attempt to explain to investors
the nature of the risk the investor incurs when buying
shares in their mutual funds. For example, Vanguard (a

U.S. company) carefully explains interest rate risk and
offers alternative funds with different interest rate risks.
Go to />hnw/FundsStocksOverview.
a. Select the bond fund you would recommend to
an investor who has very low tolerance for risk
and a short investment horizon. Justify your
answer.
b. Select the bond fund you would recommend to
an investor who has very high tolerance for risk
and a long investment horizon. Justify your
answer.

Be sure to visit the MyEconLab website at www.myeconlab.com.This online
homework and tutorial system puts you in control of your own learning with
study and practice tools directly correlated to this chapter content.
On the MyEconLab website you will find the following mini-case for this chapter:
Mini-Case 6.1:Yield Curve Hypotheses and the Effects of Economic Events