Term structure of interest rates following table The following yield data for a number of highest-quality corporate bonds existed at each of the three points in time noted in the a. On the same set of axes, draw the yield curve at each of the three given times. Select the graph that correctly represents the yield curves associated with the data in the table b. Label each curve in part a with its general shape (downward-sloping, upward-sloping, flat) c. Describe the general interest rate expectation existing at each of the three times, assuming expectations theory holds d. Examine the data from 5 years ago. According to the expectations theory, what approximate return did investors expect a 5-year bond to pay as of today? a. On the same set of axes, draw the yield curve at each of the three given times. Which graph correctly represents the yield curves? (Select the best answer below.) 20 Today 5 yrs ago Q 15 yrs ago 2 yrs ago 2 yrs ago Today 2yrs ag Toda 5 yrs ago 0 10 20 30 10 20 30 10 20 30 Time to Maturity (years) Time to Maturity (years) Time to Maturity (years) i Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Yield Time to maturity (years) 5 years ago 2 years ago Today 9.1% 9.2 9.3 9.5 9.4 9.3 9.4 9.3 % 14.6% 12.8 12.2 10.9 10.7 10.5 10.5 9.8 10.9 12.6 12.7 12.9 13.5 3 10 15 20 30 Print Done b. Answer the following questions about the general shape of each curve in part a. What was the shape of the yield curve 5 years ago? (Select the best answer below.) Today O A. Downward-sloping OB. Upward-sloping O C. Flat What was the shape of the yield curve 2 years ago? (Select the best answer below.) O A. Upward-sloping O B. Flat C. Downward-sloping The yield curve 2 years ago can be described as having: (Select the best answer below.) 0 A, lower expected interest rates due to a decline in the expected level of inflation. O B. higher expected inflation and higher future interest rates. Today C. expectations of stable interest rates and stable inflation. The yield curve today can be described as having: (Select the best answer below.) 0 A, lower expected interest rates due to a decline in the expected level of inflation. O B. higher expected inflation and higher future interest rates. O C. expectations of stable interest rates and stable inflation. d. Examine the data from 5 years ago. According to the expectations theory, what approximate return did investors expect a 5-year bond to pay as of today? (Select the best answer below.) A Five years ago, the 10-year bond was paying 9.3%, which would result in approximately 93% in interest over the coming decade. At the same time, the 5-year bond was paying just 9.5%, or a total of 47.5% over the five years. According to the expectations theory, investors must have expected the current 5-year rate to be 9.1% because at that rate, the total return over ten years would have been the same on a 10-year bond and on two consecutive 5-year bonds Five years ago, the 10-year bond was paying 9.5%, which would result in approximately 95% in interest over the coming decade. At the same time the 5-year bond was paying just 9.3%, or a total of 46.5% over the five years. According to the expectations theory, investors must have expected the current 5-year rate to be 9.7% because at that rate, the total return over ten years would have been the same on a 10-year bond and on two consecutive 5-year bonds O B Term structure of interest rates following table The following yield data for a number of highest-quality corporate bonds existed at each of the three points in time noted in the a. On the same set of axes, draw the yield curve at each of the three given times. Select the graph that correctly represents the yield curves associated with the data in the table b. Label each curve in part a with its general shape (downward-sloping, upward-sloping, flat) c. Describe the general interest rate expectation existing at each of the three times, assuming expectations theory holds d. Examine the data from 5 years ago. According to the expectations theory, what approximate return did investors expect a 5-year bond to pay as of today? a. On the same set of axes, draw the yield curve at each of the three given times. Which graph correctly represents the yield curves? (Select the best answer below.) 20 Today 5 yrs ago Q 15 yrs ago 2 yrs ago 2 yrs ago Today 2yrs ag Toda 5 yrs ago 0 10 20 30 10 20 30 10 20 30 Time to Maturity (years) Time to Maturity (years) Time to Maturity (years) i Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Yield Time to maturity (years) 5 years ago 2 years ago Today 9.1% 9.2 9.3 9.5 9.4 9.3 9.4 9.3 % 14.6% 12.8 12.2 10.9 10.7 10.5 10.5 9.8 10.9 12.6 12.7 12.9 13.5 3 10 15 20 30 Print Done b. Answer the following questions about the general shape of each curve in part a. What was the shape of the yield curve 5 years ago? (Select the best answer below.) Today O A. Downward-sloping OB. Upward-sloping O C. Flat What was the shape of the yield curve 2 years ago? (Select the best answer below.) O A. Upward-sloping O B. Flat C. Downward-sloping The yield curve 2 years ago can be described as having: (Select the best answer below.) 0 A, lower expected interest rates due to a decline in the expected level of inflation. O B. higher expected inflation and higher future interest rates. Today C. expectations of stable interest rates and stable inflation. The yield curve today can be described as having: (Select the best answer below.) 0 A, lower expected interest rates due to a decline in the expected level of inflation. O B. higher expected inflation and higher future interest rates. O C. expectations of stable interest rates and stable inflation. d. Examine the data from 5 years ago. According to the expectations theory, what approximate return did investors expect a 5-year bond to pay as of today? (Select the best answer below.) A Five years ago, the 10-year bond was paying 9.3%, which would result in approximately 93% in interest over the coming decade. At the same time, the 5-year bond was paying just 9.5%, or a total of 47.5% over the five years. According to the expectations theory, investors must have expected the current 5-year rate to be 9.1% because at that rate, the total return over ten years would have been the same on a 10-year bond and on two consecutive 5-year bonds Five years ago, the 10-year bond was paying 9.5%, which would result in approximately 95% in interest over the coming decade. At the same time the 5-year bond was paying just 9.3%, or a total of 46.5% over the five years. According to the expectations theory, investors must have expected the current 5-year rate to be 9.7% because at that rate, the total return over ten years would have been the same on a 10-year bond and on two consecutive 5-year bonds O B