1. Short-answer questions: a.) b.) c.) d.) e.) f.) 9-) If the yield curve includes investors' expectations, then a positively sloped yield curve would reflect what type of expectation about future interest rates? If the yield curve includes investors' expectations, then a negatively sloped yield curve would reflect what type of expectation about future interest rates? What impact would an economic expansion have on default risk premiums? What would the discount rate on risky bonds be if the market were risk neutral? How is an implied fonnvard rate used as a cutoff rate? Explain how the YTM on many municipal bonds that are subject to default have historically been less than the YTM on T-bonds that are default free. Define the preferred habitat theory