$2.$ For the period since $2005,$ plot on one graph the $30-$year conventional mortgage rate $($FRED code:

MORTGAGE$30$US$)$ and a measure of an adjustable mortgage rate $($FRED code: MORTGAGE$5$US$).$

Explain their systematic relationship using the principal $($Risk requires compensation$).$

Hint: Enter $$MORTGAGE$30$US$$ into the FRED search box. Use the $$Add Line$$ tab to enter the

adjustable mortgage rate measure, $$MORTGAGE$5$US$.$ When the full name appears below the search

box, click it and apply the $$Add data series$$ button. Finally, use the box for the starting observation

date $($to the left of the $$Edit Graph$$ button$)$ to begin the plot in January $2005.$

$3.$ Plot the difference since $1979$ between the Moody$$s Baa bond index $($FRED code: BAA$)$ and the

U$.$S$.$ Treasury $10-$year bond yield $($FRED code: GS$10).$ Comment on the trend and variability of

this $$credit risk premium$($see Chapter $7)$ before and after the $2007-2009$ financial crisis. $($LO$1)$

Hint: Enter $$WBAA$$ into the FRED search box to obtain the Moody$$s weekly BAA bond index. Select

$$Edit Graph$$ and at the $$Modify frequency$$ dropdown box select $$Monthly$.$ Then in the $$Customize

data$$ search box enter the $10-$year U$.$S$.$ Treasury bond yield, $$GS$10.$ When the full name appears

below the search box, click it and apply the $$Add$$ button. In the formula box, subtract variable $($b$)$

the $10-$year Treasury yield $$ from variable $($a$)$ the BAA bond rate index: a$-$b$.$ Then select $$Apply$.$

Finally, use the box for the starting observation $($to the left of the $$Edit Graph$$ button$)$ to enter

January $1979$ as the beginning date.