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Suppose that investors prefer one-year bonds to three-year bonds and will purchase a three-year bond only...

Suppose that investors prefer one-year bonds to three-year bonds and will purchase a three-year bond only if they expect to receive an additional 2% over the return from holding one-year bonds. Currently, one-year bonds yield 3%, but investors expect this yield to rise to 4% next year and to 6% the year after. Which of the three models of term structure is relevant in this case? What is the yield on the 3-year bond? Graph the yield curve. Clearly label your graph.

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