Name:_________________________ECO 340 820Money & Banking Homework #3, due Monday, 3!01. Consider a $1000 U. S. Treasury Bill with 270 days to maturity.If the yield to maturity is 3.8! what is the"ri#e of the T$ill%&hat is the dis#ount yield 'i.e. yield on a dis#ount $asis(%Show your wor).2.Use the $ond mar)et to S*+& ,-. /012,I- the im"a#t of the e3ents $elow on the e4uili$rium 4uantity of $onds outstandin5 and the e4uili$rium $ond "ri#e and yield.Be sure to in#lude a 5ra"h in ea#h #ase.a. /6"e#ted inflation falls! and the res"onse of $ond issuers is lar5er than the res"onse of $ond $uyers. $. The de3elo"ment of a we$ site for $ond tradin5! ma)es it mu#h easier to $uy and sell #or"orate $onds.3. In the summer of 1778! 8ussia defaulted on its de$t o$li5ations! tri55erin5 a finan#ial "ani# in some emer5in5 mar)ets as "eo"le no lon5er wanted to hold the de$t of these #ountries! "referrin5 less ris)y assets. 'This is )nown as a fli5ht to 4uality.( /6"lain how this e3ent would affe#t 'a( the ris) "remium onris)ier $onds and '$( Treasury yields.9. Consider a muni#i"al and #or"orate $ond with the same ratin5! li4uidity and maturity.a. Su""ose you are in a 2: ta6 $ra#)et! and the muni#i"al $ond yield is :.:.&hat yield on a #or"orate $ond would ma)e you indifferent $etween a ta6a$le $ond and the ta6;free muni#i"al%$. Su""ose you are in a 2: ta6 $ra#)et! and the muni#i"al $ond yield is :.:.If the #or"orate $ond has a yield of 7.:! at what ta6 rate would an in3estor $e indifferent $etween the #or"orate and muni#i"al $ond%2