graded. [8 points each] (a) According to the bond market an increase in the government budget deficit will lower interest rates. (b) For a one-year discount bond, the rate of return is greater than the yield-to-maturity. (c) According to the liquidity preference framework, if the Federal Reserve increases the money supply (adopts an expansionary monetary policy) then interest rates will decrease. (d) A consol that has a face value of $1000 makes an annual coupon payment of $58. If the price of the consol is currently at $870, then the YTM of the consol is equal to 5.8%. tal