Chapter 6
The Risk and Term Structure of Interest Rates
Chapter 6 applies the tools the students learned in Chapter 5 to understanding why and how
various interest rates differ. In courses that emphasize financial markets, this chapter is important
because students are curious about the risk and term structure of interest rates. On the other hand,
professors who focus on monetary theory and policy in their courses might want to skip this
chapter. The book has been designed so that skipping this chapter will not hinder the student’s
understanding of later chapters.