Answer all of these questions with the right question number next to the correct choice. ANSWER ALL OR NONE

7-The business section of your local newspaper predicts an expansion of the economy. If the paper is correct, what would you expect the shape of the yield curve to be?

A)You cannot tell from the given information

B)Flat

C)Downward sloping

D)Upward sloping

12-The real interest rate is 1%, inflation is expected to be constant for this year and the next five years at 2%. The maturity risk premium is given by MRPn = 0.02%*(n-1). What is the liquidity theory rate for the 6-year T-Note?

A)3.5%

B)3%

C)3.10%

D)4%

14-As a representative from Deutsche Bank to the Treasury option, you expect the real interest rate to be 1.08% and inflation to be constant for the next five years at 1.81%. You are also a believer in the Liquidity Theory so you assume an MRPn =.075*(n-1). What is the 2-year Treasury rate you expect?

15-As Morgan Stanley's representative to the Treasury bill and bond auction, you and your staff arrive at the following forecasts: Real interest rate (k*) = 0.69%. Expected inflation in years 1 through 3 (I₁ to I₃) = 1.11% Expected inflation in years 4 through 10 (I₄ to I₁₀) = 1.28%. MRP_{n, t} = 0.05 (n - 1)% Given the data above, calculate JPMorgan-Chase's expected rate of return on a 7-year T-Note under the Liquidity Theory.