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There are 3 term securities available with the following series of 1-year interest rates: Security A: 4%. 5%, 3%, 3%, 4% Security B: 4%, 2%,
There are 3 term securities available with the following series of 1-year interest rates: Security A: 4%. 5%, 3%, 3%, 4% Security B: 4%, 2%, 3%, 5%, 6% Security C: 5%, 3%, 3%, 4%, 2% Assume the expectations theory (without uncertainly) of the term structure is correct: Calculate the term structure interest rates for maturities of 1 to 5 years, for all 3 securities. Draw the yield curves for the 3 term securities of length 1 to 5 years. Which security, if you must choose 1, will you buy if you plan to have it mature in 3 years? How about 5 years? Can you do better than part c if you are allowed to be creative with your securities portfolio
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