You are a financial consultant. At various times, you have heard comments on interest

rates from one of your clients. How would you respond to each of the following

comments?

a$.$ "The yield curve is upward$-$sloping today. This suggests that the market consen us is that interest rates are expected to increase in the future."

b$.$ "I can't make any sense out of today's term structure. For short$-$term yields $($up to three years$)$ the spot rates increase with maturity; for maturities greater than three

years but less than eight years, the spot rates decline with maturity; and for maturties greater than eight years the spot rates are virtually the same for each maturity. There is simply no theory that explains a term structure with this shape."

c$.$ "When I want to determine the market's consensus of future interest rates, I calculate the forward rates."