For the Treasury curve with the data given below. Tenor Price Coupon Cpn Freq 1 100 0.21% 2 2 100 0.23% 2 3 100 0.28% 2 5 100 0.48% 2 7 100 0.71% 2 10 100 0.97% 2 20 100 1.36% 2 30 100 1.45% 2 a) Estimate the forward rates assuming they are piecewise constant. b) Estimate the forward rates assuming they are piecewise linear. Ending forward rate for interval equals the starting forward rate for next interval.

Brian has just finished college. he wants to set up a small business to make and sell fireworks. he registers his company and acquires a license from the government. he finds that most of his competitors are selling fireworks at an extremely low price. he would like to make more money, so he decides to innovate and develop better fireworks. he sells his fireworks at a higher price, and they are a huge hit with the customers. after a few years, he earns enough profit to set up a bigger fireworks factory that complies with the government’s health and safety regulations. he even starts exporting fireworks overseas. which type of economy does this scenario describe?