Question
According to a news report: The Federal Reserve made another emergency cut to interest rates on Sunday 3/15/2020, lowering the federal funds rate by 100
According to a news report: The Federal Reserve made another emergency cut to interest rates on Sunday 3/15/2020, lowering the federal funds rate by 100 bps to a range of 0-0.25 percent. The Fed is trying to stay ahead of disruptions and economic slowdown caused by the rapidly spreading coronavirus. Suppose you observe the following yield rates of US government-issued zero coupon bonds in [Table 1]:
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A. Without drawing the yield curve, comment on the shape of the current yield curve (as of 3/16/2020).
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B. Without calculating bond prices, which one bond has the highest bond price (as of 3/16/2020)?
C. Calculate the implied 1-year forward interest rate, one year from now (i.e. f1,2)
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