Question: The following pattern for one-year Treasury bills is expected over the next four 5. years: 2% 2% Year 1: Year 2: Year 3: Year 4:

The following pattern for one-year Treasury bills is expected over the next four 5. years: 2% 2% Year 1: Year 2: Year 3: Year 4: 3% 4% What return would be necessary to induce an investor to buy a i. two-year security ii. three-year security iii. four-year security b. Graph the term structure of interest rates for years 1 through 4. (10 Points)

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