The following pattern for one-year Treasury bills is expected over the next four years:
Year1, 3%
Year2, 5%
Year3, 6%
Year4, 7%
a. What return would be necessary to induce an investor to buy a two-year security?
b. What return would be necessary to induce an investor to buy a three-year security?
c. What return would be necessary to induce an investor to buy a four-year security?