1.How the Yield Curve May Respond to Prevailing Conditions

Your postings should be qualitative and provide substantive depth that advances the discussion.

Consider how economic conditions affect the default risk premium. Do you think the default risk premium will likely increase or decrease during the next 6 months?

2.Comparing Financial Institutions Classify the

types of financial institutions mentioned in this chapter as either depository or nondepository. Explain the

general difference between depository and nondepository institution sources of funds. It is often said that all

types of financial institutions have begun to offer services that were previously offered only by certain types.

Consequently, the operations of many financial

institutions are becoming more similar. Nevertheless,

performance levels still differ

3. Global Interaction of Interest Rates Why

might you expect interest rate movements of various industrialized countries to be more highly correlated in

recent years than in earlier years?

4 Nominal Rate of Interest Suppose the real

interest rate is 6 percent and the expected inflation rate

is 2 percent. What would you expect the nominal rate

of interest to be?

5. Real Interest Rate Suppose that Treasury

bills are currently paying 9 percent and the

expected inflation rate is 3 percent. What is the real

interest rate?