Yields of money market funds. Many people invest in money market funds. These are mutual funds that attempt to maintain a constant price of $1 per share while paying monthly interest. Table 10.3 gives the average annual interest rates (in percent) paid by all taxable money market funds since 1973, the first full year in which such funds were available.

(a) Make a line graph of the interest paid by money market funds for these years.

(b) Interest rates, like many economic variables, show cycles, clear but repeating up-and-down movements. In which years did the interest rate cycle reach temporary peaks?

(c) A plot against time may show a consistent trend underneath cycles. When did interest rates reach their overall peak during these years? Describe the general trend downward since that year.

Chapter 10 Exercises 215 TABLE 10.3 Average annual interest rates (in percent) paid by money market funds, 1973–2006 Year Rate Year Rate Year Rate Year Rate 1973 7.60 1982 12.23 1991 5.71 2000 5.89 1974 10.79 1983 8.58 1992 3.36 2001 3.67 1975 6.39 1984 10.04 1993 2.70 2002 1.29 1976 5.11 1985 7.71 1994 3.75 2003 0.64 1977 4.92 1986 6.26 1995 5.48 2004 0.82 1978 7.25 1987 6.12 1996 4.95 2005 2.66 1979 10.92 1988 7.11 1997 5.10 2006 4.51 1980 12.68 1989 8.87 1998 5.04 1981 16.82 1990 7.82 1999 4.64 Source: Albert J. Fredman, “A closer look at money market funds,” American Association of Individual Investors Journal, February 1997, pp. 22–27; and the 2008 Statistical Abstract of the United States.