1. Using the information contained in the table below of some selected interest rates, do the following:

Plot 3 yield curves, one for government securities; one for high-quality (low default risk) corporate debt securities; and one for low-quality (high default risk) corporate debt securities.

Maturity or Term Rate Type of Security

1 years 4.0% Corporate loan (high quality)

1 years 3.5% Treasury bill

5 years 5.0% Treasury note

5 years 6.5% Corporate bond (high quality)

5 years 8.0% Corporate bond (low quality)

10 years 10.5% Corporate bond (low quality)

10 years 8.5% Corporate bond (high quality)

10 years 7.0% Treasury bond

20 years 7.5% Treasury bond

20 years 9.5% Corporate bond (high quality)

20 years 12.0% Corporate bond (low quality)