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Current 1-yr interest rate is 12%. Forward rates during 2 nd , 3 rd , and 4 th year are 11%, 10%, and 9%, respectively.

Current 1-yr interest rate is 12%. Forward rates during 2^nd, 3^rd, and 4^th year are 11%, 10%, and 9%, respectively. Calculate YTM for 2-yr, 3-yr, and 4-yr bond. Draw the yield curve and explain its shape using appropriate theory of term structure.

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