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What is the typical relationship among interest rates on three-month Treasury bills, long-term Treasury bonds, and Baa corporate bonds?
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Three-month Treasury bills are short-term investments that are considered very low risk. They are issued by the U.S. government and their interest rates fluctuate more frequently due to their short-term nature. Long-term Treasury bonds are also issued by the Show more…
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What is the typical relationship between interest rates on three-month Treasury bills, long-term Treasury bonds, and Baa corporate bonds?
The 3-month Treasury bill interest rate is watched by investors and economists. Here’s a scatterplot of the 3-month Treasury bill rate since 1950: Clearly, the relationship is not linear. Can it be made nearly linear with a re-expression? If so, which one would you suggest? If not, why not?
Exploring Relationships Between Variables
Re-expressing Data: Get It Straight!
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