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Question 2 (12 points). Time Expect Yields on one-year Treasury Bills (percent) Liquidity Premium (percent) t 1.5 0 t+1 1.5 0.5 t+2 1.8 1.0 t+3
Question 2 (12 points). Time Expect Yields on one-year Treasury Bills (percent) Liquidity Premium (percent) t 1.5 0 t+1 1.5 0.5 t+2 1.8 1.0 t+3 2.0 1.5 t+4 3.2 2.0 (2a) Graph the Treasury yield curve using the information given above. Clearly label both axes, and write the numerical value of the yield for each point on your graph. (2b) What happens to the yield curve if expected future yields increase for time periods t+1, t+2,t+3, and t+4
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