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Please provide a detailed answer with explanations. In country Macroland, the government borrows at 5% for 1 -year maturity. However, the Central Bank has announced

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Please provide a detailed answer with explanations.

In country Macroland, the government borrows at 5% for 1 -year maturity. However, the Central Bank has announced interest rate hikes for the following years, so people expect that the next year the same 1 -year bond will pay 7% and that the interest will rise again to 8% in the year after. Compute and draw the yields curve (for 1-, 2- and 3-years bonds) of the government of Macroland, assuming that there is no risk of default and no inflation and the Central Bank announcements are credible. In country Macroland, the government borrows at 5% for 1 -year maturity. However, the Central Bank has announced interest rate hikes for the following years, so people expect that the next year the same 1 -year bond will pay 7% and that the interest will rise again to 8% in the year after. Compute and draw the yields curve (for 1-, 2- and 3-years bonds) of the government of Macroland, assuming that there is no risk of default and no inflation and the Central Bank announcements are credible

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