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Nominal interest rates and yield curves Economic forecasters predict that the fale of inflation will hold sleady at 2 per year indefinitoly. The toble. showa
Nominal interest rates and yield curves Economic forecasters predict that the fale of inflation will hold sleady at 2 per year indefinitoly. The toble. showa the noncial interest rate paid on the Treasury securities having different inaturibes. a. Approximalely what real interest rate do Treasury securitios offer investors at each maturity? b. If the nominal rale of interest paid by every Treasury secunty suddenly dropped by 1 se without any change in inflationary oxpectations, what effect, if any, would the have on your answers in part a? c. Using your findings in part a, select the appropriate yield curve for U S. Treassary secuntes. Describo the general shape and expectations reflecied by the curva. d. What would a follower of the fiquidity preference theory say about how the preferencos of lenders and boctowers tend fo affect the shape of the yold curve in part c? e. What would a follower of the masket segmentation theory say about the supply and demand for long-term loans vorsus the supply and demand for short-term loanis given the yeid curve in part e ? a spreadsheet.)
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