.

the bond's LP from the corporate spread given in the table to arrive at the bond's DRP. What yield would you predict for each of these two investments? Round your answers to three decimal places. 12-year Treasury yield: % 7-year Corporate yield: % The correct graph is e. Which part of the yield curve (the left side or right side) is likely to be most volatile over time? Short-term rates are volatile than longer-term rates; therefore, the side of the yield curve would be most volatile over time. f. Using the Treasury yield information in part c, calculate the following rates using geometric averages (round your answers to three decimal places): 1. The 1 -year rate, 1 year from now % 2. The 5 -year rate, 5 years from now % 3. The 10 -year rate, 10 years from now % 4. The 10 -year rate, 20 years from now % a. What effect would each of the following events likely have on the level of nominal interest rates? 1. Households dramatically decrease their savings rate. This action will the supply of money; therefore, interest rates will 2. Corporations increase their demand for funds following an increase in investment opportunities. This action will cause interest rates to 3. The government runs a smaller-than-expected budget deficit. The smaller the federal deficit, other things held constant, the the level of interest rates. 4. There is an increase in expected inflation. This expectation will cause interest rates to b. Suppose you are considering two possible investm ities: a 12-year Treasury bond and a 7-year, A-rated corporate bond. The current real risk-free rate is 5%, and inflation is expected to be 3% for the next 2 years, 4% for the romuvinn 4 years, and 5% thereafter. The maturity risk premium is estimated by this formula: MRP=0.02(t1)%. The liquidity prem Choose the correct graph. The correct graph is