Business, 03.12.2020 20:10 egardner4667

The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%)
1 5.9%
2 6.9
3 7.9
Next year at this time, you expect it to be:
Maturity (Years) YTM (%)
1 6.9%
2 7.9
3 8.9
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?

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The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%)
1 5.9%
...

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