$1.$

a$.$ Explain why you would be more or less willing to buy a share of Microsoft stock in the following situations:

$1.$Your wealth falls.

$2.$ You expect the stock to appreciate in value.

$3.$ The bond market becomes more liquid.

$4.$You expect gold to appreciate in value.

$5.$ Prices in the bond market become more volatile.

b$.$ Give reasons why stock prices are genrally showing a upward trend. Your answer should not exceed $5-6$ sentences.

a$.$ What is an yield curve? If interest rates are expected to rise $($ how the yield curve will behave $($upward sloping, downward sloping, flat$)$ according to the three theories, i$.$e$.,$ Expectations Theory, Liquidity Preference Theory and Market Segmentation Theory.

Suppose that the pure expectations theory holds for the bond rate. Calculate the interest rates in the terms to maturities from one to five years $($interest rates of $1-$year, $2-$year, $3-$ year, $4-$year and $5-$year bonds$)$ from one$-$year interests for the period from the $1$st to the $5$th year.

a$.2\%,3\%,4\%,5\%,6\%$

b$.6\%,5\%,4\%,3\%,2\%$

c$.5\%,5\%,5\%,5\%,5\%$

Plot three yield curves based on a$),$ b$)$ and c$).$