1. If the yield curve suddenly becomes steeper, how would you revise you predictions of interest rates in the future

2. Assuming that the expectations theory is the correct theory of the term structure, calculate the interest rates in term structure for maturities of one to five years and plot the resulting yield curves for the following series of one years interest rates over the nest five years. How would you yield curve changes if people preferred shorter-term bonds over longer-term bonds?

1. 5%, 7%, 7%, 7%, 7%
2. 5%, 4%, 4%, 4%, 4%