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Question 3 (a) Discuss how various term structures of interest theories would explain the existence of an upward-sloping yield curve or an inverse yield curve. (12 marks) (b) Evaluate the key assumptions behind each of these theories in (a) above? (131/3 marks) (c) The current yield curve is as follows: Term Yield 1 year 8.00% 2 years 7.90% 3 years 7.60% 4 years 7.30% 5 years 7.15% What are the expected future one-year interest rates over the next five years? (8 marks) Question 3 (a) Discuss how various term structures of interest theories would explain the existence of an upward-sloping yield curve or an inverse yield curve. (12 marks) (b) Evaluate the key assumptions behind each of these theories in (a) above? (131/3 marks) (c) The current yield curve is as follows: Term Yield 1 year 8.00% 2 years 7.90% 3 years 7.60% 4 years 7.30% 5 years 7.15% What are the expected future one-year interest rates over the next five years? (8 marks)