By using the yield curve you can able to get your favorable combinations in this yield curve the upward sloping are shows the long-term interest rates, otherwise it clearly shows the process, the long term interest rate is plotted above the short-term interest rates. In this curve the Flat lines are shows the process of the short term as well as the long-term rates. Because these are takes place in the same level. Here the inverted curves show the long term process that means this will shows the long-term rates and this curve also provides the information about the short term rate
The interest rates always differ based on the needs and it will move at a time. If the short-term interest has less value, then the yield curve is automatically increased than means it’s going to the high positions or else if the short term rates are increased the yield curve automatically gets least value. The yield curves always piloted by based on 3 series such as Segmented markets theory, Liquidity premium and Expectations theory. These theories are highly help to support to plot the yield curves, and it is used for the future financial reference. It is the best reference tool for the financial marketers, from this cave person gets more knowledge.
- Segmented markets theory: this theory also shows the fact three, but it does not provide any idea about the first 2 facts
- Liquidity premium theory: this theory shows all the details because it is the combinations of the segments as well as the expectation theories.
- Expectations theory: this theory helps to protect the information about the 2 facts, but it does not provide information about the third fact.