Jon wishes to invest $10,000 in U. Treasury securities for 10 years. He is considering the following investment strategies:

Jon wishes to invest $10,000 in U.S. Treasury securities for 10 years. He is considering the following investment strategies: (1) Buy a 10-year T-Note and hold it to maturity; (2) Buy a 5-year T-Note and upon maturity roll-over the principal and interest in a second 5-year T-Note; (3) Buy a Treasury with one year to maturity, and continuously roll-over the investment in one-year Treasury for 10 years. The current yields are: 2 percent on the 1-year Treasury; 4.25 percent on the 5-year T-Note; and 4.5 percent on the 10-year T-Note. Jon’s financial analysis indicates that market expectations are for the 1-year Treasury yield to rise by 50 basis points every year for the first 5 years, and then remain unchanged for the next 5 years, and for the 5-year T-Note to be the same in 5 years as it is today. Using a spreadsheet, display the total return (including the initial investment) that Jon would have FROM his investment in each of the 10 years under each of the three investment strategies. (Hint: Let column one display the value of the investment (1) after one year in the first row, after 2 years in the second row, etc., then, repeat for investment (2) in column 2, and for investment (3) in column 3. Use additional columns for questions d, e, and f.)d. Suppose that the actual short rate remained unchanged during the entire 10 years, how would that affect the 10-year rate of return on investment (3)?e. What would happen to the investment’s 10-year rate of return if the one-year rate continued to rise at 50 basis points per year for years 5 through 10?f. If the 5-year T-Note yield fell 50 basis points after five years, how much would this reduce the 10-year rate of return on investment (2)?