We have been given the following data:

i) Intrest Rate on 1 yr bond = Four Percent

ii)Intrest Rate on 2 yr bond = Five Percent

iii)Intrest Rate on 3 yr bond = Six Percent

a] Caluclate the intrest rate on a 1 yr bond, 1 year from now

b] Calculate the intrest rate on a 1 yr bond, 2 years from now

c] Draw yield graph and describe

The intrest on a 1 yr today bond falls to two percent, declines to four percent one yr from now, finally declines to 4.5 percent 2 yr years from now.

d] Find the intrest rate on a 2 yr bond now, and a 3 yr bond now.

e] Sketch and describe yield graph