ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Short-term
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Medium-term
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Long-term
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None of the above
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Detailed explanation-1: -The India 10Y Government Bond has a 7.320% yield. 10 Years vs 2 Years bond spread is 28.8 bp. Yield Curve is flat in Long-Term vs Short-Term Maturities. Central Bank Rate is 6.25% (last modification in December 2022).
Detailed explanation-2: -The government bond interest rate of 2.50% is paid periodically on SGBs over a fixed maturity period of 8 years, with no taxes levied on the interest earned.
Detailed explanation-3: -Therefore, bonds with longer maturities generally have higher interest rate risk than similar bonds with shorter maturities. to compensate investors for this interest rate risk, long-term bonds generally offer higher coupon rates than short-term bonds of the same credit quality.
Detailed explanation-4: -Long-term interest rates refer to government bonds maturing in ten years. Rates are mainly determined by the price charged by the lender, the risk from the borrower and the fall in the capital value. Long-term interest rates are generally averages of daily rates, measured as a percentage.