Suppose that the demand for federal funds curve is such that the quantity of funds demanded changes by $120 billion for each 1 percent change in the federal funds interest rate. also, assume that the current federal funds rate is at the 3 percent rate that is targeted by the fed. now suppose that the fed retargets the rate to 3.5 percent.

In the fall of 2008, aig, the largest insurance company in the world at the time, was at risk of defaulting due to the severity of the global financial crisis. as a result, the u.s. government stepped in to support aig with large capital injections and an ownership stake. how would this affect, if at all, the yield and risk premium on aig corporate debt?