Question by Capitalist_pig: What are some relationships amongst different interest costs?
Are there any effectively acknowledged relationships between various interest prices?

For instance: The 20-year T-Bond rate is normally 2% over three-month T-Bills.

Stuff like that. Is there a website that would have issues like that? It does not have to be just treasury protection charges, it can be inflation prices, Federal Reserve fascination prices, whatever.

Thanks

Very best answer:

Answer by financegal27
Fascination prices are basically a reflection of the riskiness of the investment. The reason the T-Bond is normally greater than the t-invoice is due to the duration danger. Simply put if all issues have been equivalent most people would desire to tie up their cash for the least volume of time, so to motivate investors to tie up their funds for 20 a long time as opposed to 3 months they should be compensated more for that threat.

Bond rates are typically ploted on a graph and referred to as a yield curve. There are 2 main theories that tackle the yield curve of bonds. The very first is called the liquidity preference principle, which is illustrated in the illustration previously mentioned. The Liquidity desire concept states that investors are naturally inclined in direction of far more liquid property and to entice these traders into extended term, less liquid bonds you ought to compensate them by spending them a higher coupon payment. The 2nd concept is referred to as the expectation concept. In accordance to the expectation idea investor expectations about the direction of long run curiosity prices act as the power driving the yield curve. This is more extensively approved since it explains why the yield curve is often inverted with longer term costs decrease than shorter expression costs.

There is a excellent internet site that gets into some of these relationships that you are going to probably uncover beneficial.

http://www.pathtoinvesting.org/invchoices/bonds/yieldcrv/ic_yieldcrv_011.htm

Include your personal remedy in the responses!