Solutions to Quiz 2 are after the questions
a) (10 points) What has happened to the slope of the yield curve as defined as the i on 10 year GS minus the i on 3 month T-bill from March 1984 to June 1984? Explain 3 reasons why the slope could have changed the way it did. EXPLAIN WHY SLOPE GOT STEEPER. HIGHER EXPECTED INTEREST RATES. HIGHER TERM PRMIUM. HIGHER INFLATIONARY EXPECTATIONS ................
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