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Assume that yields on U.S. Treasury securitjes were as follows: a. Seiect a correct yield curve based on these data. 9. Iriterept. Piote B b.

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Assume that yields on U.S. Treasury securitjes were as follows: a. Seiect a correct yield curve based on these data. 9. Iriterept. Piote B b. What type of yleld curve is shown? The yith cume ia matiod c. What intormation does this graph tell you? d. Based on this yield curve, if you needed to borrow money for longer than 1 year, would it make sense for you to borrow short term and renew the loan or borrow long term? Explain. 1. Even though the borrower reinvests in increasing short-term rates, those rates are still below the long-term rate, but what makes the higher long-term rate attractive is the rollover risk that may possibly occur if the short-term rates go even higher than the long-term rate (and that could be for a long timet). It Generaly, it would make sense to boerow short-term because each year the loan is renewed the interest rate would be higher. III. Generaliy, it would make sense to borrow short-term because each year the loan is renewed the interest rate would be lower. IV. Generally, it would make sense to borrow long-term because each year the loan is renewed the interest rate would be lowee. V. Differences in ylelds that may exist between the short-term and long-tern cannot be txplained by the forces of supply and demand in each market

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