Question: The term structure for zero-coupon bonds is currently: Maturity (Years) 1 2 3 YTN ( 5.50 6.5 7.5 Next year at this time, you expect
The term structure for zero-coupon bonds is currently: Maturity (Years) 1 2 3 YTN ( 5.50 6.5 7.5 Next year at this time, you expect it to be: Maturity (Years) 1 2 3 YTM (8) 6.58 7.5 8.5 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.) YTM Maturity 1 2 % b-2. Is the market's expectation of the return on the 3-year bond greater or less than yours? O Greater O Less
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