1. Assume semi-annual rates. 2-year rates are 4% and 10-year rates are 6%. You believe that interest rates for for 8 years beginning in 2 years will be 7%. What should you do?

2. You think rates are going up. Should you buy a floating rate note, a 5-year fixed rate bond or a 10-year fixed rate bond? Does the shape of the yield curve affect your decision?

3. You think rates are going down. Should you buy a floating rate note, a 10-year current coupon bond or a 10-year zero coupon bond? Does the shape of the yield curve affect your decision?