Term structure of interest rates The following yield dala for a nurrbier of highest-qualily corporale bords existed at each of the three points in linie noled in the falloywing labku: 3 a. On the same set of axes, drew the yield curve at each of the three given times. Select the graph that correctly represents the yield curves Essociated 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. Exermine the data from 5 years ago. According to the expectations theory, what approximate retum did investors expect a 5-year bond to pay as of today? a. On the same set of axes, drew the yield curve at each of the three given times. Which graph correctly represents the yield curves? (Select the best answer below) OA OB c. 20 20 20 15 Taday 5 yrs ago 55 yrs ago 2 yrs ago 15 ago Today 2 10 101 BE 2 12 yrs ago 5 Today 5 yrs ago 0 0 10 30 Time to Maturity years) 10 20 Time to Malur year) U 20 30 Time to Malurily years) 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) X Data table O A. Upwarc-sloping B. Downward-sloping OC. Flat (Click on the icon located on the top-right comer of the dala table below in order to copy its contents into a spreadsheet.) What was the shape of the yield curve 2 years ago? (Select the best answer below.) 2 Yield Today O A Flat B. Dewrward sloping OC. Upward sloping . Time to maturity (years) 1 3 5 10 15 20 30 5 years ago 2 years ago 7.5% 12.7% 7.9 10.9 7.9 10.3 7.6 9.0 7.8 8.8 8.6 7.6 a. 7.7% a. 2 9.3 11.0 11.1 11.3 11.9 What is the shape of the yield curve today? (Select the best answer below) O A. Flat OB. Downward sloping OC. Upward sloping Print Done c. Answer the following questions about the general inflationary and interest rate expectation existing at each of the three times. The yiek curve 5 years aga can be described as having: (Select the best answer below.) O A. Iwer expected interest rates ducta a decline in the expected level of inflation. Term structure of interest rates The following yield data for a number of highest-quality corporate bonds existed at each of the three points in time noted in the following table: 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? c. Answer the following questions about the general inflationary and interest rate expectation existing at each of the three times. The yield curve 5 years ago can be described as having: (Select the best answer below.) O A. lower expected interest rates due to a decline in the expected level of inflation. OB. higher expected inflation and higher future interest rates. O c. expectations of stable interest rates and stable inflation. The yield curve 2 years ago can be described as having: (Select the best answer below.) O A. lower expected interest rates due to a decline in the expected level of inflation. OB. higher expected inflation and higher future interest rates. O c. expectations of stable interest rates and stable inflation, The yield curve today can be described as having: (Select the best answer below.) O A. lower expected interest rates due to a decline in the expected level of inflation. OB. 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.) O A. Five years ago, the 10-year bond was paying 7.9%, which would result in approximately 79% in interest over the coming decade. At the same time, the 5-year bond was paying just 7.6%, a total of 38% over the five years. According to the expectations theory, investors must have expected the current 5-year rate to be 8.2% 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. OB. Five years ago, the 10-year bond was paying 7.6%, which would result in approximately 76% in interest over the coming decade. At the same time, the 5-year bond was paying just 7.9%, or a total of 39.5% over the five years. According to the expectations theory, investors must have expected the current 5-year rate to be 7.3% because at that rate, the total return over ten years would have been the same on a 10-year bond and Next