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1. Assuming the expectations theory is the correct theory of the term structure of interest rates, calculate the interest rates in the term structures for maturities of one to five years for following series of one year rates.

a) 5%, 7%, 7% 7%, 7%

b) 5%, 4%, 4%, 4%, 4%

2. Suppose the pension fund you are managing is expecting an inflow of funds $100 000 next year and you want to make sure that you earn the current interest rate of 8% when you invest the incoming funds. How would you use the futures market to do this?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92714653

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