1. The US government has more than $16 trillion in debt outstanding in the form of Treasury bills, notes, and bonds in 2013. With short-term interest rates near 0% in 2013, suppose that the Treasury decided to replace maturing notes and bonds by issuing new Treasury bills, thus shortening the average maturity of US debt outstanding. Discuss the pros and cons of this strategy.

2. Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and non-quantitative facts best predict bond defaults. Furthermore, some of the raters invest time and money to meet privately with corporate personnel to get nonpublic information that is used in assigning the issues bond rating. To recoup those cots, some bond rating agencies have tied their rating to the purchase of additional services. Do you believe that this is an acceptable practice? Defend your position.