You are given the following data: Spot rates, August 23, 2023 Historical Average rates Expected rates (August 2023, year ahead) -Period 1 year 5.37% 3.05% 2 year 4.97% 3.30% 2.59% 3 year 4.70% 3.45% 1.75% (a) Calculate implied term premia for both August 2023 market and for the Historical Average market. Show your work (use Excel file for the submission). What do these tell us? (b) What happens if, due to rising media reports of deaccelerating inflation, markets expectations for future spot rates fall to 3% for Year 2 and to 2% for Year 3? Show your work and explain/discuss the results.

You are given the following data: (a) Calculate implied term premia for both August 2023 market and for the Historical Average market. Show your work (use Excel file for the submission). What do these tell us? (b) What happens if, due to rising media reports of deaccelerating inflation, markets expectations for future spot rates fall to 3% for Year 2 and to 2% for Year 3 ? Show your work and explain/discuss the results