Please show working.

1) Say that taxes on Treasury bond earnings fall. Consequently, we would expect that the yield on municipal bonds will ____.

2) A bank issues $360 loans to two types of borrowers, type A and B. Type A repays with probability 0.85 and type B repays with probability 0.75. If the bank has perfect information about type, then the difference between the two competitive interest rates on these loans is _____%.