Suppose the interest rate this year and the expected interest rate for the future years are the following

Year	This year	One year later	Two years later	Three years later	Four years later
i	3%	4%	5%	6%	7%

Determine the yield to maturity on a

1. two-year bond.

1. four-year bond.

1. Draw a yield curve using the information from the table. (maturity ranges from 1 to 5 years)

4. Using the IS-LM diagram, show the impact of a contractionary monetary policy for a country when

(a) it does not affect expectations about future interest rates and output

(b) it affects expectations about future interest rates and output