Discuss briefly the shape of the yield curve

Reference no: EM13688898

The yield of a 1-year bond is 3%, the yield of a 3-year bond is 5%, and the expectation on a 1- year bond sold in two years is 4%.

a. Determine the expectation on the yield of a 1-year bond sold in one year using the expectation theory of interest rates.

b. Discuss briefly the shape of the yield curve.

Reference no: EM13688898

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