The current yield curve for default$-$free zero$-$coupon bonds is as follows:

$\backslash$table$[[$Maturity $($Years$),$YTM $(\%)],[,1]]$

Under E$.$H$.,$ what is the expected yield on a two$-$year zero coupon bond to be observed at the end of the first year? The answer should be an annual rate.

$\backslash$table$[[$Maturity$,$Forward Rate$],[2$ year,$]]$

What should be the current price of a $3-$year maturity bond with a $13\mathrm{.}5\%$ coupon rate paid annually? Par$=100$

$\backslash$table$[[$Current price,$]]$

If you purchased the coupon bond at the price you computed above, what would your total expected rate of return be over the next year $($coupon plus price change$)?$ Ignore taxes.

Expected return

Answer the above question assumming liquidity premium $=1\%$ per year for all future years.

Expected Return