Business, 11.02.2020 22:45 aronrobinson4

The term structure for zero-coupon bonds is currently:
Maturity (Years) YTM (%)
1 4.1%
2 5.1
3 6.1
Next year at this time, you expect it to be:
Maturity (Years) YTM (%)
1 5.1%
2 6.1
3 7.1
a.
What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

b-1.
Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? (Round your answers to 2 decimal places. Omit the "%" sign in your response

b-2.
Is the market's expectation of the return on the 3-year bond greater or less than yours?

Answers: 1

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The term structure for zero-coupon bonds is currently:
Maturity (Years) YTM (%)
1 4.1%

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