1. Analyze and compare and contrast the two major economic theories of the structure of interest rates: the Expectations Theory and Market Segmentation Theory. Show the advantages and disadvantages of each theory
2. Why do some investors prefer to use a country’s swap curve (if available), than a country’s yield curve of government bonds?
3. Bank 1 offers to lend you $100,000 at a nominal rate of 5.50%, compounded daily. Bank 2 offers to lend you the $100,000, but it will charge 6.20%, compounded monthly. What's the difference in the effective annual rates charged by the two banks?