1. Use the information on bond yields for September 2016 and September 2017 to answer the following questions. YOU MUST SHOW YOUR WORK 2017 US Treasury Corporate AAA Corporate AA Corporate A Corporate BBB Municipal AAA Municipal AA Municipal A 1-Year Bond Yields % Sept 2016 and 2017 2016 0.68% 1.36% 0.73 1.49 1.22 1.62 1.42 1.82 1.85 0.75 1.09 0.88 1.23 0.99 1.28 2.15 US Treasury Yield Curve 1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 10 Yr_20 Yr 30 Yr 9/17 0.961.06 0.16 0.26 1.20 1.31 0.42 0.58 1.47 0.75 1.62 0.86 1.92 1.12 2.16 1.39 2.33 1.56 2.63 1.96 2.86 2.28 9/16 5-year TIPS 9/17 0.16% 9/16 -0.17% A. Using 5-year bond yields, calculate the expected rate of inflation in September 2016 and September 2017: 2017: 2016: B. Calculate the probability of default on a corporate BBB bond in September 2016 and September 2017: 2017: 2016: C. Assuming a 35% tax bracket, calculate the tax equivalent yield for a Municipal AAA bond in September 2017. 1. Use the information on bond yields for September 2016 and September 2017 to answer the following questions. YOU MUST SHOW YOUR WORK 2017 US Treasury Corporate AAA Corporate AA Corporate A Corporate BBB Municipal AAA Municipal AA Municipal A 1-Year Bond Yields % Sept 2016 and 2017 2016 0.68% 1.36% 0.73 1.49 1.22 1.62 1.42 1.82 1.85 0.75 1.09 0.88 1.23 0.99 1.28 2.15 US Treasury Yield Curve 1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 10 Yr_20 Yr 30 Yr 9/17 0.961.06 0.16 0.26 1.20 1.31 0.42 0.58 1.47 0.75 1.62 0.86 1.92 1.12 2.16 1.39 2.33 1.56 2.63 1.96 2.86 2.28 9/16 5-year TIPS 9/17 0.16% 9/16 -0.17% A. Using 5-year bond yields, calculate the expected rate of inflation in September 2016 and September 2017: 2017: 2016: B. Calculate the probability of default on a corporate BBB bond in September 2016 and September 2017: 2017: 2016: C. Assuming a 35% tax bracket, calculate the tax equivalent yield for a Municipal AAA bond in September 2017