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Nominal and real rates and yield curves A firm wishing to evaluate interest rate behavior has gathered data on nominal rate of interest and on inflationary expectation for five U.S. Treasury securities, each having a different maturity and each measured at a different point in time during the year just ended. (Note: Assume that the risk that future interest rate movements will affect longer maturities more than shorter maturities is zero; that is, there is no maturity risk.) These data are summarized in the following table: a. Using the preceding data, find the real rate of interest at each point in time. b. Describe the behavior of the real rate of interest over the year. What forces might be responsible for such behavior? c. Assuming that the nominal rates were measured at the same point in time, select the graph that correctly shows the yield curve associated with the data in the table d. Describe the resulting yield curve in part c, and explain the general expectations embodied in it. a. Using the preceding data, find the real rate of interest at each point in time. The real rate of interest for security Ais % (Round to one decimal place.) The real rate of interest for security Bis % (Round to one decimal place.) The real rate of interest for security Cis % (Round to one decimal place.) The real rate of interest for security Dis % (Round to one decimal place.) The real rate of interest for security E is % (Round to one decimal place) b. Describe the behavior of the real rate of interest over the year The real rate of interest from Jan. 7 to Mar. 12. (Select from the drop-down menu.) The real rate of interest V from Mar. 12 to May 30. (Select from the drop-down menu.) The real rate of interest from May 30 to Aug. 15. (Select from the drop-down menu.) The real rate of interest from Aug. 15 to Dec 30 (Select from the drop-down menu.) What forces might be responsible for a change in a real rate of interest? (Choose all that apply.) A. Changes in international trade balance B. Changes in government budget deficit. C. Changes in unemployment rate. DD. Changes in tax legislation. c. Assuming that the nominal rates were measured at the same point in time, which of the following graphs correctly shows the yield curve associated with the data in the table? (Select the best answer below.) OA. . Yield Curve of U.S. Treasury Securities 18 Yield Curve of U.S. Treasury Securities 18 12 12 6- 6- 0- $ 10 15 20 Time to Maturity (years) 10 15 Time to Maturity (years) OC. OD Yield Curve of U.S. Treasury Securities 18- Yield Curve of U.S. Treasury Securities 187 12- R 124 Yield (%) 0- 10 15 20 Time to Maturity (years) 10 15 20 Time to Maturity (years) d. Describe the resulting yield curve in part c, and explain the general expectations embodied in it. (Select from the drop-down menus.) The yield curve is indicating that interest rates are expected to be Nominal and real rates and yield curves A firm wishing to evaluate interest rate behavior has gathered data on nominal rate of interest and on inflationary expectation for five U.S. Treasury securities, each having a different maturity and each measured at a different point in time during the year just ended. (Note: Assume that the risk that future interest rate movements will affect longer maturities more than shorter maturities is zero; that is, there is no maturity risk.) These data are summarized in the following table: a. Using the preceding data, find the real rate of interest at each point in time. b. Describe the behavior of the real rate of interest over the year. What forces might be responsible for such behavior? c. Assuming that the nominal rates were measured at the same point in time, select the graph that correctly shows the yield curve associated with the data in the table d. Describe the resulting yield curve in part c, and explain the general expectations embodied in it. a. Using the preceding data, find the real rate of interest at each point in time. The real rate of interest for security Ais % (Round to one decimal place.) The real rate of interest for security Bis % (Round to one decimal place.) The real rate of interest for security Cis % (Round to one decimal place.) The real rate of interest for security Dis % (Round to one decimal place.) The real rate of interest for security E is % (Round to one decimal place) b. Describe the behavior of the real rate of interest over the year The real rate of interest from Jan. 7 to Mar. 12. (Select from the drop-down menu.) The real rate of interest V from Mar. 12 to May 30. (Select from the drop-down menu.) The real rate of interest from May 30 to Aug. 15. (Select from the drop-down menu.) The real rate of interest from Aug. 15 to Dec 30 (Select from the drop-down menu.) What forces might be responsible for a change in a real rate of interest? (Choose all that apply.) A. Changes in international trade balance B. Changes in government budget deficit. C. Changes in unemployment rate. DD. Changes in tax legislation. c. Assuming that the nominal rates were measured at the same point in time, which of the following graphs correctly shows the yield curve associated with the data in the table? (Select the best answer below.) OA. . Yield Curve of U.S. Treasury Securities 18 Yield Curve of U.S. Treasury Securities 18 12 12 6- 6- 0- $ 10 15 20 Time to Maturity (years) 10 15 Time to Maturity (years) OC. OD Yield Curve of U.S. Treasury Securities 18- Yield Curve of U.S. Treasury Securities 187 12- R 124 Yield (%) 0- 10 15 20 Time to Maturity (years) 10 15 20 Time to Maturity (years) d. Describe the resulting yield curve in part c, and explain the general expectations embodied in it. (Select from the drop-down menus.) The yield curve is indicating that interest rates are expected to be