Given the following Treasury Yield Curve data for 10-22-2019.
Days until maturity Yield %
30 1.73
90 1.62
180 1.6
360 1.55
720 1.6
1800 1.6
2520 1.68
Please describe the above Treasury yield curve above. (15 points)
Include the following information:
- Is this a normal, inverted, or flat yield curve? (1 point)
- What is the relationship between yields and prices? (4 points)
- Given the prices of the treasuries, what do the prices imply about the demand of Treasuries? (5 points)
- What type of economy does this type of yield curve predict? (5 points)
Question 2: (20 points)
You have watched two videos in class – The Pension Gamble video and Money, Power, and Wall Street.
Write about how each one of these videos discusses the following:
(1) the Financial Crisis of 2008-2009 (10 points) and
(2) the recovery of Wall Street versus Main Street to the Financial Crisis. (10 points)
Question 3:
Completely answer the following three questions about the independence of Central Banks. (20 points)
(1) Discuss the advantages and disadvantages of having an independent Central Bank. (10 points)
(2) Given these advantages and disadvantages, argue effectively whether it is good to have an independent Central Bank. (5 points)
(3) Given your argument, is it ever appropriate for the President of the United States to pressure the Federal Reserve to raise or lower interest rates? (5 points)
Question 4:
Completely answer the following questions about Money Market instruments. (30 points)
(1) What is the money market? Why is it preferred to bank loans? Explain. (6 points)
(2) List and explain at least 3 Money Market securities? What type of organization uses these securities and for what purpose? (12 points)
(3) Similar to what we did in class, create two problems where you solve for the discount of a Treasury Bill (360 days) and calculate the annualized yield for a Treasury Bill (365 days). Provide the equations, the numbers for the variables, and then calculate the answers. (12 points)
Sample Solution