Question: The term structure for zero-coupon bonds is currently Maturity (Years) 1 2 3 YTM(M) 4.2% 5.2 6.2 Next year at this time, you expect it

 The term structure for zero-coupon bonds is currently Maturity (Years) 1

The term structure for zero-coupon bonds is currently Maturity (Years) 1 2 3 YTM(M) 4.2% 5.2 6.2 Next year at this time, you expect it to be: Maturity (Years) 1 2. 3 YTMC) 5.2% 6.2 7.2 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 1 decimal place.) Rate of return 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.) Maturity YTM 1 % 2 % b-2. Is the market's expectation of the return on the 3 year bond greater or less than yours? Greater O Less

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