ECON 340 Fall 2017 Assignment #4 5 pts. Please do your work neatly-do not cram it all on this sheet. Due: 3 PM, Weds., Oct 11 (b) If there is a term premium, itp2.of 0.5%. what does the market think, or expect, the future short-term yield, i' 1, to be? Please explain and show your work. 1. Irina the Investor wants to receive 3% after-tax return. (a) If the tax rate is 15%, what before-tax, interest rate will Irvina ask borrowers to pay her? Plese show your work. b)nina still wants 3% in after-tax return. If the tax rate is 30%, before-tax, interest rate will Irvina ask borrowers to pay her now? Please show your work. c) With the tax rate on one axis, and the before-tax interest rate on the other, draw the relationship between the tax rate and the before-tax interest rate. 2) You click on a website and see the following yield curve: mhrest rate ( %) 4 2 (a) Given that information, according to the Pure Expectations Theory, what does the market think, or expect, the future short- term yield, , to be? Please explain and show your work