1. Draw a graph of a normal shaped yield curve. Remember to properly label everything.

2. The one year interest rate now = 4%. Your forecast of the one-year rate next year (one year forward) is 4.6%. According to expectations theory, what should be the two-year interest rate now?

3. The one year interest rate now = 5%. The forecast one-year forward rates are 5.2% (next year) and 5.4% (the following year). According to expectations theory, what should be the three-year interest rate now?

4. The one year interest rate now is 7.2%. The two year interest rate now is 6.3%. What is the implied one-year interest rate next year (1-year forward)?

5. The one year interest rate now = 3%. The three year interest rate now is 4.2%. Your forecast of the one year interest rate next year (1 year forward) = 4%. What is the implied forecast of the one-year interest rate at time 2 (two years forward)?

6. Draw a graph of a yield curve that illustrates the market segmentation theory with separate markets in three different maturity ranges.