Problem: The following pattern for one-year Treasury bills is expected over the next four years:
Year1, 3%
Year2, 5%
Year3, 6%
Year4, 7%
Q1. What return would be necessary to induce an investor to buy a two-year security?
Q2. What return would be necessary to induce an investor to buy a three-year security?
Q3. What return would be necessary to induce an investor to buy a four-year security?