Explain the term structure of a fixed income debt instrument with a par value of $1,000, 20 years to maturity, and a nominal interest rate of 8%. Determine the following:
- Yield to maturity
- The effect on the above bond of an increase in market interest rates to 9%
- The effect on the above bond of a decrease in market interest rate to 7%
Also, explain what is meant by the yield curve.
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