PART 1: Short objective questions with explanations Q1. (20%) As an Analyst for a Mayfair hedge fund trading bonds, you are preparing for the Monday morning trader's meeting. Using the following data from Reuters, please answer the questions below in preparation for the meeting: Bank of England Overnight Rate 2% Current Forecast of Annual Inflation 3% Annual Growth Rate in Maturity Premium 10% a. Using the data supplied, please plot the current yield curve out to fifteen years. (10 marks) b. Due to economic uncertainty, it is expected that the Bank of England will pursue an expansionary monetary policy, how might the yield curve shift? Explain why. (20 marks) c. If the markets became more worried about the future, how would it affect the Maturity Premium and how would the Yield Curve shift? Explain why. (20 marks) PART 1: Short objective questions with explanations Q1. (20%) As an Analyst for a Mayfair hedge fund trading bonds, you are preparing for the Monday morning trader's meeting. Using the following data from Reuters, please answer the questions below in preparation for the meeting: Bank of England Overnight Rate 2% Current Forecast of Annual Inflation 3% Annual Growth Rate in Maturity Premium 10% a. Using the data supplied, please plot the current yield curve out to fifteen years. (10 marks) b. Due to economic uncertainty, it is expected that the Bank of England will pursue an expansionary monetary policy, how might the yield curve shift? Explain why. (20 marks) c. If the markets became more worried about the future, how would it affect the Maturity Premium and how would the Yield Curve shift? Explain why. (20 marks)