1. What do these yield curves suggest about market expectations with regard to the behavior of the Brazilian Real to US Dollar exchange rate? Briefly explain your answer.

Yield curves, Brazil and US Gov't bond yields US Brazil 0.25 0.043 7.5 0.5 0.051 8.25 1 0.079 8.81 2 0.266 9.45 3 0.485 9.47 5 0.93 9.94 7 1.257 10.35 10 1.465 10.97 pct. per nnuma. 14 12 10 8 6 ONAR 0 0.25 0.5 1 2 3 5 7 10 maturity (years) Series 1 Series 2