The term structure for zero$-$coupon bonds is currently:

Next year at this time, you expect it to be:

Required:

a$.$ What do you expect the rate of return to be over the coming year on a $3-$year zero$-$coupon

bond?

b$.$ 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?

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

Complete this question by entering your answers in the tabs below.

Required A

What do you expect the rate of return to be over the coming year on a $3-$year zero$-$coupon bond?

Note: Round your answer to $1$ decimal place.