Calculate interest rates in term structure for maturities

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Reference no: EM13837291

Assuming that expectation theory is the correct theory of the term structure,

(a) Calculate the interest rates in the term structure for maturities of one to five years, and plot the resulting yield curves for the following paths of one-year interest rates over the next five years:

i) 6%, 7%, 8%, 7%, 6%

ii)6%, 5%, 4%, 5%, 6%

b) How would your yield curves both in (i) and (ii) change if people preferred shorter-term bonds over longer-term bonds?

Reference no: EM13837291

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