The table below details the term structure of interest rates as at 01 January 2020.

A) Using the information above, describe the shape of the spot yield curve using the terminology covered in this unit.

B) Using the data in the table above, which of the three curves: par curve, spot curve and forward curve is the highest before year 7. How would you expect the forward curve to change at year 8 relative to the spot curve (i.e. lie above or below). Please explain your answers.

C) Using the data in the table above, calculate all forward rates that can be found using year 2, year 3 and year 4 spot rates. Show all working and formulas used.

D) Based on the data in the table above, explain the term structure of the yield curve using the expectations theory, and the market segmentation theory, remembering to contrast the underlying assumptions of the two theories.

(1) (2) (3) 4) (5) (6) (7) (8) 9) (10) Maturity (T) Spot Rate(%) -0.48 -0.3 -0.15 -0.03 0.08 0.18 0.16 0.1 0.04 -0.02 (1) (2) (3) 4) (5) (6) (7) (8) 9) (10) Maturity (T) Spot Rate(%) -0.48 -0.3 -0.15 -0.03 0.08 0.18 0.16 0.1 0.04 -0.02