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QUESTION 3 Consider the effect of an un-anticipated 1 basis point increase in the 5...

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QUESTION 3 Consider the effect of an un-anticipated 1 basis point increase in the 5 year bond rate (xt) at time t, which persists of t+1, 12,... Assuming the 2 year bond rate (24) does not change, and no other shocks occur at any horizon, what is the most appropriato inference regarding the change in the 10 year bond rate () on impact (10., at time t)? Od. The 10 year bond rate increases by 1.515 on impact O b. The 10 year bond rate decreases by 0.0175 on impact OC. The change in the 10 year bond rate on impact is between 14453 and 1.5847 with 95% confidence. Od. The change in the 10 year bond rate on impact in contained in a 95% confidence interval centred at -0.0175 b

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