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Consider the quarterly interest rate data below. 3-month Treasury Bill 10-year Treasury Bill 10-year Baa Corporate Bond March 0.6 2.0 2.5 June 0.6 1.8 2.5

Consider the quarterly interest rate data below. 3-month Treasury Bill 10-year Treasury Bill 10-year Baa Corporate Bond March 0.6 2.0 2.5 June 0.6 1.8 2.5 September 0.6 1.6 2.4 December 0.5 1.2 2.0 (a) Explain how the term structure (i.e., yield curve) has changed between March and December. (b) What happened to the risk structure over the same period? Calculate the risk premium and compare. (c)

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