GROUP 4

FORECASTING U.S INTEREST RATES

Based on the information provided, we can make the following observations:
1. Over the past six months, U.S.interest rates have declined.
2. The U.S.economy has weakened over the past year.
3. The U.S.saving rate is expected to decrease sightly over the next year.
4. The U.S.central bank is not expected to implement any policy changes that
would significantly impact interest rates.
5. The U.S.economy is expected to strengthen considerably over the next year but
still be weaker than it was two years ago.
6. The U.S.annual budget deficit is expected to increase sightly from last year but
be significantly less than the average annual budget deficit over the past five
years.
7. The U.S.inflation rate is expected to rise sightly but remain below the relatively
high levels of two years ago.
8. The U.S.dollar is expected to weaken against the Canadian dollar and other
foreign currencies over the next year.
Based on these observations, we can forecast that U.S.interest rates are likely to
remain low or potentially decrease sightly in the near future. The weakened
economy, lower saving rate, and relatively low inflation rate suggest that the U.S
central bank will maintain an accommodative monetary policy to support
economic growth.
FORECASTING CANADIAN INTEREST RATES
Based on the information provided, we can make the following observations:
1. Over the past six months, Canadian interest rates have increased.
2. The Canadian economy has improved over the past year.
3. The Canadian saving rate is expected to remain stable over the next year.
4. The Canadian central bank is not expected to implement any policy changes
that would significantly impact interest rates.
5. The Canadian economy is expected to remain stable.
6. The Canadian budget deficit is expected to be about the same as last year.
7. The Canadian inflation rate is expected to decline.
8. The U.S. dollar is expected to weaken against the Canadian dollar and other
foreign currencies over the next year.
Based on these observations, we can forecast that Canadian interest rates are likely
to remain stable or potentially decrease slightly in the near future. The improved
 economy, stable saving rate, and declining inflation rate suggest that the Canadian
central bank will maintain a neutral or potentially accommodative monetary policy
to support economic stability.

DIFFERENCE IN YIELD BETWEEN U.S. CORPORATE BONDS AND U.S.

TREASURY BONDS

When the perceived risk of corporations in the United States is expected to increase,
the yield of newly issued U.S. corporate bonds will generally increase to a greater
degree than the yield of newly issued U.S. Treasury bonds. This is because the
perceived risk of default by corporations increases the risk premium demanded by
investors, leading to higher yields on corporate bonds.

On the other hand, U.S. Treasury bonds are considered to have a lower default risk
as they are backed by the U.S. government. Therefore, the yield of U.S. Treasury
bonds is typically less affected by changes in the perceived risk of corporations
compared to corporate bonds.

In summary, an increase in the perceived risk of corporations in the United States

would result in a larger increase in the yield of newly issued U.S. corporate bonds
compared to U.S. Treasury bonds.