Question: I need this one kinda quick. I asked it yesterday, but I'm not sure I posted it correctly. Please help! :) Suppose the yield to

I need this one kinda quick. I asked it yesterday, but I'm not sure I posted it correctly. Please help! :)

Suppose the yield to maturity on a one-year zero-coupon bond is 8%. The yield to maturity on a two-year zero-coupon bond is 10%. Answer the following questions (use annual compounding):

(a) According to the Expectations Hypothesis, what is the expected one-year rate in the

marketplace for year 2?

(b) Consider a one-year investor who expects the yield to maturity on a one-year bond to

equal 6% next year. How should this investor arrange his or her portfolio today?

structure according to the Expectations Hypothesis?

Thanks!

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