a. Describe the relationship between the interest rates on bonds of different maturities.

b. If we follow the Expectation Hypothesis, calculate the interest rate on a 3-year bond if

a 1-year bond has an interest rate of 2% and is expected to have an interest rate of 3% next year, and 5% in two years.

c. How does the Liquidity Premium Theory explain an upward-sloping yield curve during normal economic environment?

d. Explain the economic implications of an inverted yield curve.