Read chapter six. From your findings on the assignment below, answer the following questions:
1. Why is the interest rate on a Five year TBond higher than the rate on the TBill
2. Why is the interest rate on a 10 – year TBond higher than the rate on the 5- year TBond
3. Explain the shape of the graph. Why does the Federal Reserve increase or reduce interest rates? Explain this using examples of the Fed’s policy in the last 15 years.
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http://www.federalreserve.gov/releases/H15/data.htm (Links to an external site.)
Go to the Federal Reserve web site above, retrieve and graph interest rate data for the following financial instruments:
1. Three months Treasury Bill (TBill)
2. Five years Treasury Bond (TBond)
3. Ten years Treasury Bond (TBond)
Note: Use data for the past 20 years.
