Nominal interest rates and yield curves A recent study of inflationary expectations has revealed that the consensus among economic forecasters yields the following average annual rates of inflation expected over the periods noted. (Note: Assume that the risk that future interest rate movements will affect longer maturities more than shorter maturities is zero, that is, assume that there is no maturity risk.)a. If the real rate of interest is currently 2.5%, find the nominal rate of interest on each of the following U.S. Treasury issues: 20-year bond, 3-month bill, 2-year note, and 5-year bond.b. If the real rate of interest suddenly dropped to 2% without any change in inflationary expectations, what effect, if any, would it have on your answers in part a? Explain.c. Using your findings in part a, draw a yield curve for U.S. Treasury securities. Describe the general shape and expectations reflected by the curve.d. What would a follower of the liquidity preference theory say about how th
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