Exercise . (Yield curves in two-factor Vasicek) In the two-factor Vasicek model, the zero-coupon yields are given by (.). Develop a spreadsheet in which you can compute yields for a large number of maturities and illustrate the yield curve graphically. What shapes can the yield curve have? How does the shape depend on the current values of the state variables and the parameters of the model? You can use the following benchmark parameters: ϕˆ = ., κr = ., βr = .,

κε = ., βε = ., and ρ = . Start with initial values r = . and ε = .