You can buy or sell a 3.5% coupon $1,000 par u. s. treasury note that matures in 6 years. the first coupon payment pays 6 months from now, and the note pays coupons semi-annually until maturity. it also pays par on maturity. the yield to maturity of the note right now (treat this as your discount rate) is 3.000%. (a) what are the cash flows associated with this note? (b) which of these cash flows are annuity dues, ordinary annuities, or single cash flows? (c) what is the present value of all payments associated with this note? (d) if interest rates moved up, what would happen to the value of this note? (e) if a stranger was willing to buy or sell you the bond for $1000, would you buy or sell it - and why? (hint: assume no altruism here.)

Suppose a new "payment technology" allows individuals to make payments using u.s. treasury bonds (i.e., u.s. treasury bonds are immediately cashed when needed to make a payment and that balance is transferred to the payee). how do you think this payment technology would affect the transactions component of the demand for money? a. this would lead to a decreased need to hold cash for transactions; however, the transactions demand for money would remain unchanged. b. this would lead to a decreased need to hold cash for transactions, thus the transactions demand for money would decrease. c. this would lead to an increased need to hold cash for transactions, thus the transactions demand for money would increase. d. this technology would not change the transactions component of the demand for money.