choose, 1. down sloping, upward sloping, flat, humped

choose 2. higher in the long term, lower in the long term, higher in the intermediate term, the same in the long term

Nominal interest rates and yield curves Economic forecasters predict that the rate of inflation will hold steady at 2.5% per year indefinitely. The table, , shows the nominal interest rate paid on the Treasury securities having different maturities. a. Approximately what real interest rate do Treasury securities offer investors at each maturity? b. If the nominal rate of interest paid by every Treasury security suddenly dropped by 1% without any change in inflationary expectations, what effect, if any, would this have on your answers in part a? c. Using your findings in part a, select the appropriate yield curve for U.S. Treasury securities. Describe the general shape and expectations reflected by the curve. d. What would a follower of the liquidity preference theory say about how the preferences of lenders and borrowers tend to affect the shape of the yield curve in part c ? e. What would a follower of the market segmentation theory say about the supply and demand for long-term loans versus the supply and demand for short-term loans given the a. The real rate of interest on the 3-month U.S. Treasury bill is decimal place.) The real rate of interest on the 2-year U.S. Treasury note is decimal place.) The real rate of interest on the 5-year U.S. Treasury bond is decimal place.) The real rate of interest on the 10-year U.S. Treasury bond is decimal place.) The real rate of interest on the 20-year U.S. Treasury bond is decimal place.) \%. (Round to one \%. (Round to one \%. (Round to one \%. (Round to one \%. (Round to one b. If the nominal rate of interest paid by every Treasury security suddenly dropped by 1.5% without any change in inflationary expectations, what effect, if any, would this have on your answers in part a? (Select the best answer below.) A. The real interest rate in each case would decrease by 1.5%. B. The real interest rate in each case would increase by 1.5%. C. The real interest rate in each case would stay the same. D. The real interest rate in each case would decrease by 1%. E. The real interest rate in each case would increase by 1%. c. Using your findings in part a, which of the following graphs shows the appropriate yield curve for the U.S. Treasury securities in the table?. (Select the best answer below.) c. Using your findings in part a, which of the following graphs shows the appropriate yield curve for the U.S. Treasury securities in the table?. (Select the best answer below.) A. Yield Curve of U.S. Treasurv Securitie: B. Yield Curve of U.S. Treasury Securitie: C. Yield Curve of U.S. Treasury Securitie: D. Yield Curve of U.S. Treasury Securitie Describe the general shape and expectations reflected by the curve. (Select from the drop-down menus.) The yield curve is , indicating that interest rates are expected to be d. What would a follower of the liquidity preference theory say about how the preferences of lenders and borrowers tend to affect the shape of the yield curve in part c ? (Select the best answer below.) A. Followers of the liquidity preference theory would state that the upward sloping shape of the curve is due to the desire by lenders to lend long term and the desire by business to borrow short term. B. Followers of the liquidity preference theory would state that the upward sloping shape of the curve is due to the desire by lenders to lend short term and the desire by business to borrow long term. C. Followers of the liquidity preference theory would state that the downward sloping shape of the curve is due to the desire by lenders to lend short term and the desire by business to borrow long term. D. Followers of the liquidity preference theory would state that the upward sloping shape of the curve is due to the desire by business to lend short term and the desire by lenders to borrow long term. e. What would a follower of the market segmentation theory say about the supply and demand for long-term loans versus the supply and demand for short-term loans given the yield curve in part c? (Select the best answer below.) A. Market segmentation theorists would argue that the downward slope is due to the fact that under current economic conditions there is greater demand for long-term loans for items such as real estate than for short-term loans for seasonal needs. B. Market segmentation theorists would argue that the upward slope is due to the fact that under current economic conditions there is greater demand for short-term loans for items such as real estate than for long-term loans for seasonal needs. C. Market segmentation theorists would argue that the upward slope is due to the fact that under current economic conditions there is a smaller demand for long-term loans for items such as real estate than for short-term loans for seasonal needs. D. Market segmentation theorists would argue that the upward slope is due to the fact that under current economic conditions there is greater demand for long-term loans for items such as real estate than for short-term loans for seasonal needs. Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.)