In response to the Great Recession, Federal Reserve leaders continue to keep the short run target interest
Question:
In response to the Great Recession, Federal Reserve leaders continue to keep the short run target interest rate near zero. While the Fed controls short-term interest rates, long-term interest rates essentially depend on supply/demand dynamics, as well as longer-term interest rate expectations. Consider the following annualized rates for 3-month Treasury yields and 10-year Treasury yields.
a. Construct and interpret a scatter plot of a 10-year treasury yield against a 3-month yield.
b. Calculate and interpret the sample correlation coefficient. Use α = 0.05 to test if the population correlation coefficient is significantly different from zero.
c. Estimate and interpret a sample regression equation using the 10-year yield as the response variable and the 3-month yield as the explanatory variable.
Step by Step Answer:
Business Statistics Communicating With Numbers
ISBN: 9780078020551
2nd Edition
Authors: Sanjiv Jaggia, Alison Kelly