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Analysts predict that short-term interest rates over the next 4 years will be as follows: 4.4%, 8.5%, 9%, and 3.5%, respectively. According to expectations theory,

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Analysts predict that short-term interest rates over the next 4 years will be as follows: 4.4%, 8.5%, 9%, and 3.5%, respectively. According to expectations theory, the yield on a discount bond with a three year maturity will be and yield on bond with a four year maturity will be O7.3%; 6.35% O 7.3%; 5.55% O7.44%: 6.35% O7.44%; 5.55% After new tax legislation is passed, the tax advantages of municipal bonds over US Treasury bonds rise. As a result, in the US Treasury bond market, the equilibrium yield and in the municipal bond market the yield O falls; falls O falls; rises Orises; falls Orises; rises

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