Listed below are data that pertain to the corporate bond market. (Note: Each period below covers a span of six months.)

Period 1 Period 2 Period 3 Period 4 Average yield on 10 high-grade corporate bonds 5.30% 5.70% 5.10% ? Yield on the Dow Jones average of 40 corporate bonds 6.50% ? 6.00% 4.90% Yield spread (in basis points) ? 155 ? 25 Confidence index A. Compute the confidence index for each of the four periods listed above.

B. Assume that the latest confidence index (for period 0, in effect) amounts to 86.83%, while the yield spread between high- and average-grade corporate bonds is 85 basis points. Based on your calculations, whats happening to bond yield spreads and the confidence index over the period of time covered in the problem (i.e., from period 0 through period 4)?