Problem:
Assume that expectations theory is the correct theory, calculate the interest rates in the term structure for maturities of one to five years, and plot the resulting yield curves for the following series of one-year interest rates over the next five years .
year 1 5%,
year 2 7%,
year 3 7%,
year 4 7%,
year 5 7%,
and can you explain also that,
How would my yield curve change if people preferred shorter term bonds over longer term bonds?