1. Suppose that nominal interest rate for mortgage loans increased from 5% to 10% and the expected inflation rate in housing sector increased from 1% to 7%. How does it affect the total housing demand? Why? (20 pts) 2- Suppose that Central Bank of the Republic of Turkey announced that it will implement a monetary expansion which increased the inflation expectations. Using the supply and demand for bonds graphically show and explain how interest rates are affected after this announcement. (20 pts) 3- Find the current price of a 3-year coupon bond which has a face value of 1000 TL, 5% coupon payment and 6% yield to maturity? (20 pt) 4- Calculate the equilibrium interest rate of a 1-year discount bond with a face value of 1000. The demand and supply curves for this bond are represented by the following equations: (20 points) BA: Price =-0.8 * Quantity + 1160 B: Price = Quantity + 720 5- One-year interest rates over the next five years are expected to be as follows: 5%, 9%, 10%, 15%, 16 Assuming the expectations theory is the correct theory of the term structure, calculate the interest rates in the term structure for maturities of one to five years, and plot the resulting yield curve. (20 pts)