1) On the internet watch a video of the yield curve at http://www.businessinsider.com/us-treasury-yield-curve-evolution-1982-2014-2014-12. Use the yield curve video demonstration to answer the following questions.

a. Describe briefly, what the yield curve looked like for most of the time period covered (normal, steep, inverted, flat).

b. Describe briefly, what the yield curve looks like currently.

c. Based upon the demonstration, do short-term rates or long-term rates tend to be more volatile? Explain.

d. Describe what happened to interest rates between January 2004 and January 2007. What would have happened if you took out successive short-term loans (such as an adjustable rate mortgage) during that period?

e. Look at the current shape of the yield curve. If you have a short-term loan (or an adjustable rate mortgage based upon short-term rates), would you benefit from the current shape of the yield curve? Explain.