82 Consider the following annual rates git 5.0/2-6% 03-7% 1i3-3%, 211-5.5%, Assume yearly compounding The notation...

 

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82 Consider the following annual rates git 5.0/2-6% 03-7% 1i3-3%, 211-5.5%, Assume yearly compounding The notation follows the convention used in the course, where the first subscript is the start of the investment and the second subscript the length of the investment. These subscripts are expressed in number of years. a) Draw a unique timeline and indicate with 5 arrows the 5 investments implied by the interest rates listed above, Make sure that you include the relevant interest rates for each year of each (1 mark) (b) Assuming expectations theory holds, calculate ola. (Always use general formula with notation before plugging your numbers] (1 mark) (c) Assuming expectations theory holds, derive the implicit expectation sin" embedded in the yield curve. [Always use general formula with notation before plugging your numbers). Is expectations theory a theory that explains the formation of expectations by investors? Explain your answer. (1.5 marks) (d) with rigorous calculations, check whether expectations theory holds for gis, Explain your reasoning. [Always use general formula with notation before plugging your numbers), is there a liquidity premium? if yes, calculate its value and interpret it. if not, provide an interpretation (2 marks] Hand write neutly the answers on a blank piece of paper with your full name and student number at the top of the page. Take a picture or several pictures if needed and convertitor them into a pdf jule Upload the pdf file into this question. Only one pdf file can be uploaded per question so merge your pictures of needed. Carefully keep your hand written answers and your original pictures for future reference 82 Consider the following annual rates git 5.0/2-6% 03-7% 1i3-3%, 211-5.5%, Assume yearly compounding The notation follows the convention used in the course, where the first subscript is the start of the investment and the second subscript the length of the investment. These subscripts are expressed in number of years. a) Draw a unique timeline and indicate with 5 arrows the 5 investments implied by the interest rates listed above, Make sure that you include the relevant interest rates for each year of each (1 mark) (b) Assuming expectations theory holds, calculate ola. (Always use general formula with notation before plugging your numbers] (1 mark) (c) Assuming expectations theory holds, derive the implicit expectation sin" embedded in the yield curve. [Always use general formula with notation before plugging your numbers). Is expectations theory a theory that explains the formation of expectations by investors? Explain your answer. (1.5 marks) (d) with rigorous calculations, check whether expectations theory holds for gis, Explain your reasoning. [Always use general formula with notation before plugging your numbers), is there a liquidity premium? if yes, calculate its value and interpret it. if not, provide an interpretation (2 marks] Hand write neutly the answers on a blank piece of paper with your full name and student number at the top of the page. Take a picture or several pictures if needed and convertitor them into a pdf jule Upload the pdf file into this question. Only one pdf file can be uploaded per question so merge your pictures of needed. Carefully keep your hand written answers and your original pictures for future reference