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The expected path of one - year interest rates over the next five years is 3 percent, 4 percent, 6 percent, 7 percent, and 5

The expected path of one-year interest rates over the next five years is 3 percent, 4 percent, 6 percent, 7 percent, and 5 percent, respectively. Given that the expectations theory is the correct theory of the term structure:a) Draw the yield curve for the 5-year period. (10 pts)b) If the investors prefer shorter-term bond to longer-term bond, what happen to the shape of the yield curve? (5 pts)

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