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Please help me to solve these questions. Kindly solve all parts its my request. All are linked. This is money and banking class. Question 1

Please help me to solve these questions. Kindly solve all parts its my request. All are linked. This is money and banking class.

Question 1

1 a. Graph the yield curve from this table.

Years to Maturity

Yield to Maturity

1

1%

2

3%

3

4%

4

4.5%

5

4.75%

1 b. Suppose there is an increase in demand for 1-year bonds, on the above graph show what will happen to he yield curve under both Expectations Theory and Segmented Markets Theory. Then describe what will happen under each theory.

Question 2

2 a . Construct bond market graphs for corporate bonds and default-free treasury bonds with Price on the y-axis.

2 b. Suppose the government enact a social policy that has the effect of increasing the wealth of the average consumer. What happens to the above graphs and the Risk Premium?

2 c. There has been a string of bankruptcies in the secondary market leading to decline in the number of financial trades, decreasing the liquidity of corporate bonds. What happens to the above graphs and the Risk Premium?

Question 3

Construct a general asset market graph with interest rate as the Y-axis. Draw a what would happen to the market for this asset if the economy goes through a business cycle contraction.

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