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6.1 Introduction

  • Interest rates are both a barometer of the economy and an instrument for its control.
  • The term structure of interest rates-market interest rates at various maturities-is a vital input into the valuation of many financial products.
  • The goal of this topic is to explain the term structure and interest rate dynamics-that is, the process by which the yields and prices of bonds evolve over time.

Lesson Wrap-Up

This lesson should leave you able to explain the introduction in a fixed-income context and connect it to the decisions made by issuers, investors, or analysts.

Review Prompts

  1. Explain introduction in your own words.
  2. State one exam-style risk, valuation, or market implication of the introduction.