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Money and Capital Markets: Financial Institutions and Instruments in a Global Marketplace, 8/e

Peter Rose, Texas A & M University

The Impact of Inflation, Deflation, Yield Curves, and Duration on Interest Rates and Asset Prices

Standard & Poor's Questions

Chapter 7 in Money and Capital Markets: The Impact of Inflation and Deflation, Yield Curves and Duration on Interest Rates and Asset Prices

Question 1

Which financial-service firms listed on Market Insight seem to be most susceptible to inflation? Deflation? How did you reach your conclusions?

Question 2

Which financial-service firms represented in S&P’s Market Insight appear to be most susceptible to changes in the shape or slope of the yield curve? Please explain why.

Question 3

In recent years the yield curve has, in most periods, displayed a significant upward slope. In what way would this tend to influence the relative earnings or profitability of long-term lenders like life insurance companies (for example: Sun Life Financial Services (SLC) in the Market Insight collection of financial companies) compared to more short-term lenders like banks (for example: FleetBoston Financial Corp (FBF))?

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