Yield Environment: using the worksheet and instruction set provided on the 610 BBCC, complete a review of the current and expected interest rate market environment; provide a distinction between the Treasury yield and the Real Treasury Yield using the data from the appropriate sites; and provide an estimate of inflation expectations using this data.

Go to http://research.stlouisfed.org/fred2

1. Under categories, select interest rates, then select three-month Treasury bills series (secondary market). Describe how this rate has changed in the past twelve months (12 months) months. Using information learned from the text, assignments, discussions and readings in this course, explain why the interest rate changed as it did.

2. Retrieve data at the beginning of the last 20 quarters for the three-month Treasury and for the producer price index (ppi) for all companies; place this data for both in two columns of Excel. Then in separate columns, derive the change in interest rate for both on the quarterly basis. The percentage change in the producer price index on a quarterly basis serves as a measure of inflation. Apply Regression Analysis in Excel to the two columns of percentage change in which the change in interest rate is the dependent variable and the measure of inflation (change in ppi) is the independent variable. Explain what you observe: does it appear that inflation and change in interest rates are positively related?