You are now an intern working with one prestigious commercial bank in Kuala Lumpur. You have been assigned by your supervisor to find the minimum interest rate that the bank you work with can charge its most credit-worthy customer. This rate is assumed to be sufficient to cover the cost of funds and the banks profit. The basis for the minimum interest rate calculations should be using the most recent five-years Malaysian Government Bonds (MGB) i.e. bonds issued by the Malaysian government. Assumed that over a period of time, the liquidity premium for MGB in case of credit worthy customers is 1.5%.

You are required to:

Obtain information on government securities (most recent T-bills and MGBs) of various maturities, plot maturities of these securities against their yields and draw a yield curve and then interpret the shape of the yield curve using:

1. The Pure Expectations Theory
2. The Liquidity Premium Theory
3. The Market Segmentation Theory
4. Which theory do you think best describes the curve?

how to plot the yield curve?