Question 3 a) The term structure of interest rates is the relationship between time to maturity and interest rates for a default free pure discount asset. Explain and discuss three different theories explaining the shape of the term structure. (Maximum of 200 words) 10 marks b) Explain why in a particular year interest rates are different for different interest-bearing assets. Explain why interest rates for a particular interest-bearing asset can change over a number of years. 8 marks c) Investment A will pay you 1,000,000 in eight years' time; investment B will pay you 30,000 each year for all years into the future with the first payment today. If interest rates are expected to remain at 6% per year, calculate the present value for investments A and B and note which one is more valuable. 7 marks (Total: 25 Marks)