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4. Drawing a yield curve

Given the indicated maturities listed in the following table, assume the following yields for US Treasury securities:

Maturity (Years)	1	5	10	20	30
Yield (%)	5.5	5.0	4.7	4.4	3.8

On the following graph, plot the yield curve implied by these interest rates. Place a blue point (circle symbol) at each maturity and interest rate in the table, and the yield curve will draw itself.

Yield Curve051015202530109876543210INTEREST RATE (Percent)MATURITY (Years)20, 4.4

The graphs yield curve is referred to asa normal yield curve.

Based on the yield curve shown, which of the following statements is true?

If inflation in the future is expected to increase, the yield curve on US Treasuries is likely to be downward sloping.

Interest rates on short-term maturities are higher than rates on medium- and long-term maturities.