1.How would a cut in government expenditures leading to a decrease in budget deficit (keeping all the other factors constant) affect bond prices? Explain and show with the help of a well-labeled demand and supply diagram for bonds. Please also state the impact of this change in bond prices on interest rates.

2.What is expected to happen to bond prices and therefore on interest rates when the expected inflation increases? Why? Explain and show with the help of a well-labeled demand and supply diagram for bonds.

4.What is the effective after-tax yield to an investor from a bond paying $100 per $1,000 annually, if the investor is in a 25% marginal tax bracket? Explain.