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Nominal interest rates and yield curves Economic forecasters predict that the rate of inflation will hold steady at 1.5% per year indefinitely. The table.. shows the nominal interest rate paid on the Treasury securities having different maturities a. Approximately what real interest rate do Treasury securities offer investors at each maturity? b. If the nominal rate of interest paid by every Treasury security suddenly dropped by 0.5% without any change in Inflationary expectations, what effect, if any, would this have on your answers in part a? c. Using your findings in part a, select the appropriate 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 the preferences of lenders and borrowers tend to affect the shape of the yield curve in partc? e. What would a follower of the market segmentation theory say about the supply and demand for long-term loans versus the supply and derriand for short-term loans given the yield curve in partc? a. The real rate of interest on the 3-month U.S. Treasury bill is %. (Round to one decirrial place.) The real rate of interest on the 2-year U.S. Treasury note is %. (Round to one decimal place.) The real rate of interest on the 5-year U.S. Treasury bond is %. (Round to one decimal place.) The real rate of interest on the 10-year U.S. Treasury bond is %. (Round to one decimal place.) The real rate of interest on the 20-year U.S. Treasury bond is %. (Round to one decimal place.) b. If the nominal rate of interest paid by every Treasury security suddenly dropped by 0.5% without any change in inflationary expectations, what effect, if any, would this have on your answers part a? (Select the best answer below.) O A. The real interest rate in each case would decrease by 0.5% OB. The real interest rate in each case would increase by 0.5%. O C. The real interest rate in each case would stay the same. OD. The real interest rate in each case would decrease by 1%. O E. The real interest rate in each case would increase by 1% c. Using your findings in part a, which of the following graphs shows the appropriate yield curve for the U.S. Treasury securities in the table? (Select the best answer below.) Nominal interest rates and yield curves Economic forecasters predict that the rate of inflation will hold steady at 1.5% per year indefinitely. The table.. shows the nominal interest rate paid on the Treasury securities having different maturities a. Approximately what real interest rate do Treasury securities offer investors at each maturity? b. If the nominal rate of interest paid by every Treasury security suddenly dropped by 0.5% without any change in Inflationary expectations, what effect, if any, would this have on your answers in part a? c. Using your findings in part a, select the appropriate 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 the preferences of lenders and borrowers tend to affect the shape of the yield curve in partc? e. What would a follower of the market segmentation theory say about the supply and demand for long-term loans versus the supply and derriand for short-term loans given the yield curve in partc? a. The real rate of interest on the 3-month U.S. Treasury bill is %. (Round to one decirrial place.) The real rate of interest on the 2-year U.S. Treasury note is %. (Round to one decimal place.) The real rate of interest on the 5-year U.S. Treasury bond is %. (Round to one decimal place.) The real rate of interest on the 10-year U.S. Treasury bond is %. (Round to one decimal place.) The real rate of interest on the 20-year U.S. Treasury bond is %. (Round to one decimal place.) b. If the nominal rate of interest paid by every Treasury security suddenly dropped by 0.5% without any change in inflationary expectations, what effect, if any, would this have on your answers part a? (Select the best answer below.) O A. The real interest rate in each case would decrease by 0.5% OB. The real interest rate in each case would increase by 0.5%. O C. The real interest rate in each case would stay the same. OD. The real interest rate in each case would decrease by 1%. O E. The real interest rate in each case would increase by 1% c. Using your findings in part a, which of the following graphs shows the appropriate yield curve for the U.S. Treasury securities in the table? (Select the best answer below.)

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