Period Average annual rate of inflation 3 months 5 2 years 6 5 years 8 10 years 85 20 years 9 a If the real rate of interest is currently 25 find the nominal rate of interest on each of the following US Treasury issues 20year bond 3month bill 2year note and 5year bond b If the real rate of interest suddenly dropped to 2 without any change in inflationary expectations what effect if any would it have on your answers in part a Explain c Using your findings in part a draw a yield curve for US Treas

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