(answered) – 1) (20 points total) Using the links below, answer the followingDescriptionSolution downloadThe QuestionPlease answer the attached questions. Include all work and formulas(if any).I need this done ASAP.? within 1 1/2 hours1) (20 points total) Using the links below, answer the following questions:Go to http://research.stlouisfed.org/fred2/data/GS30.txt for data on the 30 US GSGo to http://research.stlouisfed.org/fred2/data/BAA.txt for data on the BAA corporatebond (30 year)a) (5 points) Calculate the risk premium between these two bonds for December,2007 (beginning of Great Recession) and compare to the risk premium forDecember 2008 (in the midst of the Great Recession)b) (10 points) Now draw bond supply – bond demand diagrams (side by side) withthe baa corporate bond market on the left and the 30 year US GS market on theright. Label as point A, the conditions that existed in December 2007 – be sure tolabel your bond demand curves accordingly (subscript 12/07). Note that we don’tknow the prices of these two bonds but we do know what happens to the prices.Now add in the new conditions that existed in December of 2008. We are holdingthe supply of both bonds constant in this example.c) (5 points) Now explain why your diagram has changed the way it has, being sureto relate your discussion to your answer in part a)2) (20 points total) Use the links below to answer the following questions:Go to http://research.stlouisfed.org/fred2/data/GS10.txt for data on the 10 year US GSGo to http://research.stlouisfed.org/fred2/data/TB3MS.txt for data on the 3 month Tbilla) (10 points) In the space below, draw a yield curve representing the conditions asof December 2007 along with drawing another yield curve representing theconditions as of December 2008. Be sure to label your yield curves with the dateas a subscript.b) (10 points) What has happened to the position and slope of the yield curve andare these results consistent with the three term structure facts? Be sure to refer toeach term structure fact and apply it to this example.
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