(2) Question 3. Zero Lower Bound. In this question, we are interested in zero-coupon bond prices for nominal bonds. Under the expectations hypothesis, yt. 2(y" + Et[y+1]). Expo- nentiating this equation, we have Z4,4+2 = exp{-24()} = exp{-y{") Ep[y{}}]} = exp{-4}}} exp{-Et[y{1}]} = Zt,x+1 exp{-Ex[y{1}]} Zt,t+1 and find a strategy that gives an arbitrage profit. Remember these bonds are nominal, i.e., denominated in units of currency, so "holding cash is an alternative. (2) Question 3. Zero Lower Bound. In this question, we are interested in zero-coupon bond prices for nominal bonds. Under the expectations hypothesis, yt. 2(y" + Et[y+1]). Expo- nentiating this equation, we have Z4,4+2 = exp{-24()} = exp{-y{") Ep[y{}}]} = exp{-4}}} exp{-Et[y{1}]} = Zt,x+1 exp{-Ex[y{1}]} Zt,t+1 and find a strategy that gives an arbitrage profit. Remember these bonds are nominal, i.e., denominated in units of currency, so "holding cash is an alternative