You read in The Wall Street Journal that 30-day T-bills (risk-free security) currently are yielding 8 percent. Your brother-in-law, a broker at Kyoto Securities, has given you the following estimates of current interest rate premiums for BBB rated bonds:

Liquidity premium	1%
Maturity risk premium	2%
Default risk premium	2%

Based on these data, the rate of return on BBB rated bond is (Hint: use the rate of return formula in Chapters 6,7)

	a.	13%
	b.	11%
	c.	10%
	d.	12%

When the return on short-term securities are higher than return on long-term securities of similar risk,

	a.	the economy is said to have flat yield curve
	b.	the shape of the yield curve cannot be determined
	c.	the economy is said to have normal yield curve
	d.	the economy is said to have inverted yield curve