1. Federal Reserve Bank (FED) raised the target for the federal funds rate by 25 basis points from 0%.25% to .25\%- .5% on March 16th,2022. Subsequently, FED further raised the target by 50 basis points in May and by 75 basis points in June, July, September, and November of 2022. It is widely anticipated that FED will increase the target by either 50 or 75 basis points in December. However, there is a divergence in the predictions of the future course of FED's policy in 2023. Some economists argue that FED will pause after December, whereas others believe that FED will continue to hike the rates, albeit at a slower rate. The current target for the federal funds rate (as of November 29th,2022 ) is 3.75%4%. The FED also began selling its holding of Treasury bonds and mortgage-backed securities (MBS) from June of this year (Quantitative Tightening). Stock market as measured by the S\&P 500 declined from 4797 on January 3rd,2022 to 3577 on October 12th,2022 (25.5\% drop). Nasdaq fell by almost 38% during the same period. However, the stock market has rebounded since October 12th, as the fear of aggressive tightening by FED has dissipated due to gradual decline in the inflation rate (from 9.1% in June to 7.7% in October). Do you think FED will continue to raise the target for federal funds rate in the next six months or will they pause? What is your prediction of the stock market in six months from now? 2. For what specific situation would a long position on put options on S\&P 500 Index be helpful? For what specific situation would a bear spread with call options on Japanese Yen be helpful? Suppose the investors expect that the FED will continue to raise the federal funds rate in the future. Should these investors hedge their bond portfolio by taking a long position or a short position on call options on Treasury bond futures contracts? Why? Explain