Question: Please answer both questions and show relevant equations/work for both. Thank you! Suppose the equilibrium fed funds rate is 4%; the output gap is 1%;

Please answer both questions and show relevant equations/work for both. Thank you!

Suppose the equilibrium fed funds rate is 4%; the output gap is 1%; target inflation is 2%; actual inflation is 7%. According to the Taylor Rule the target fed funds rate is % A. 12 B. 11 C. 10 D. 13 Assume a bond with a par value of $1000 pays an annual coupon of 5% and has 10 years to maturity. Its yield to maturity is 6%. Its current yield is approximately %. A. 5.0 B. 4 C. 4.4 D. 5.4

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