a) The 1-year interest rate is <u>3.25%</u>.
b) The 2-year interest rate is <u>7.12%</u>.
c) The 3-year interest rate is <u>11.68%</u>.
d) The 4-year interest rate is <u>16.99%</u>.
e) The yield curve is always <u>upward-sloping</u>. With increased time to maturity, interest rate increases to compensate for the increased risks associated with a longer term.
f) Yes. The usual shape of the yield curve is upward-sloping because short-term securities generate lower yields than long-term debt instruments.
<h3>What is the interest rate?</h3>
The interest rate is the compensation for undertaking financial risks in view of the time value of money.
The interest rate depends on two factors, the maturity period and the implied risks involved.
The interest rate can be computed using the following yield-to-maturity formula:
YTM Formula = (100%/Price %) - 1
Years to Price (% of Interest rate =
Maturity face value) (100%/Price %) - 1
1 96.852% 3.25% (100/96.852 - 1)
2 93.351% 7.12% (100/93.351 - 1)
3 89.544% 11.68% (100/89.544 - 1)
4 85.480% 16.99% (100/85.480 - 1)
Learn more about the interest rate and yield-to-maturity at brainly.com/question/28033398
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