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4. The Fed is expected to increase the target federal funds rate. This will tend to flatten the yield curve. With this in mind, please
4. The Fed is expected to increase the target federal funds rate. This will tend to flatten the yield curve. With this in mind, please answer the following questions. You are given the following data: Settlement Date: 14 Sep-17 Repo Rate: 3% Reverse Repo Rate: 3.5% 14-Sep. 19-Sep a) Compute the yields on the above bonds on 14-Sep-17 and 19-Sep-17. b) Compute the invoice price of each bond on 14-Sep-17 and 19-Sep-17. c) Which of these bonds will you use for the Repo transaction? Which one will you use for the Reverse Repo transaction? d) Compute the profit/loss from the Repo transaction and the Reverse Repo transaction. e) Using a graph explain the change in the yield curve from 14-Sep-17 and 19-Sep-17
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