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3.9 Do you agree with Herr Liszt’s opinion that storybooks are not important? Give reasons to support your answer. (3)

4.2 Why have the young men in the story had to resort to crime? (2)

Total Question 4 [10] GRAND TOTAL [50]

3.4 Why does Bruno use this word (Out-With) instead of the correct name? What does this tell us about him? (2)

If liquidity for a security increases, what happens to the liquidity risk premium that investors demand?

What is the relationship between inverted yield curves and the possibility of future recessions?

HEY! Isn’t it about time we had a free question with some free points?

If you expect inflation to be 5.25% over the coming year and you demand a real return of 3.5%, what ex-ante nominal risk free return will you demand?  Round answer to 4 significant decimals in % format.

What is the current target range for the federal funds interest rate?

If you were expecting a 6% inflation rate and demanded a 2.0 % positive real return for the year, your ex-ante desired nominal rate would be 8.12%.  If, at the end of the year, actual inflation was 12%, what would your ex-post real return be? Round to 4 significant decimals.