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The chart on page 167 of book 4 of the required readings is driving me nuts. (Especially considering I remember understanding it the first go-round.

What does it mean for the positive and negative convex securities to get "steeper" and "flatter". What chart would represent a perfectly flat yield curve?

Maybe I'm not sure what you're asking, but its just a chart showing the behavior of yields for a security exhibiting positive and negative convexity.

Flatter - would look more like a straight line.

Steeper - would be more curved.

A chart with a horizontal line would represent a flat yield curve, I'm not really sure what else to say regarding that.

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