Test 1 - FIRE 314, FALL 2007, OPPORTUNITY #2, 11/8/07...

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FIRE 314, FALL 2007, OPPORTUNITY #2, 11/8/07 PLEASE READ BEFORE CONTINUING 1) You are allowed one 8 1/2 x 11 sheet of notes. 2) You are allowed to use a hand-held calculator for calculations. 3) Please answer clearly. Clarity of presentation is considered part of the answer. Unclear or imprecise answers will not receive full credit. 4) Show all work in quantitative problems! No credit will be given if the chain of reasoning is not evident in the answer. IF YOU DON’T SHOW ME YOU’R WORK, I CAN’T GIVE PART CREDIT!!! 5) Any lapse of ethical behavior will result in a grade of zero for this exam. ALL QUESTIONS EQUALLY WEIGHTED!!!! 1) You expect short-term interest rates to increase over the next few years, to a level of 9%, and stay there. Draw the yield curve predicted by the Unbiased Expectations theory (be sure to label axes!) 2) There are lots of folks who are willing to lend short-term, but not too many who want to borrow short-term. At the same time, there are few folks who want to lend long-term, but
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This note was uploaded on 12/07/2009 for the course FIRE 314 taught by Professor Upton during the Spring '09 term at VCU.

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Test 1 - FIRE 314, FALL 2007, OPPORTUNITY #2, 11/8/07...

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