What effect would each of the following events likely have on the level of nominal interest rates? 1. Households dramatically increase their savings rate. This action will the supply of money; therefore, interest rates will 2. Corporations decrease their demand for funds following a decrease 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 a decrease in expected inflation. This expectation will cause interest rates to \begin{tabular}{|c|c|c|c|} \hline \multicolumn{4}{|c|}{ Corporate Bond Yield } \\ \hline & Rate & Spread = DRP + LP & \\ \hline U.S. Treasury & 0.83% & - & \\ \hline AAA corporate & 0.93 & 0.10% & \\ \hline AA corporate & 1.33 & 0.50 & \\ \hline A corporate & 1.67 & 0.84 & \\ \hline \multicolumn{4}{|c|}{ What yield would you predict for each of these two investments? Round your answers to three decimal places } \\ \hline 12-year Treasury yield: & \multicolumn{2}{|c|}{6.553%} & \\ \hline 7-year Corporate yield: & \multicolumn{2}{|c|}{6.977%} & \\ \hline \end{tabular} c. Given the following Treasury bond yield information, construct a graph of the yield curve. Choose the correct graph. The correct graph is Choose the correct graph. 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 cr 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 nowl % 4. The 10 -year rate, 20 years from now %