1. Why is it unlikely that the expectations theory alone is the correct theory for explaining the yield curve?
2. Is terminal value a crucial part of the valuation estimate for a firm? Explain your yes or no answer. Also explain the challenges with estimating terminal value.
3. Explain why a mortgage-backed security becomes riskier when the values of the underlying houses decline. What, as a result, happens to the price of the mortgagebacked security?