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What do you expect the rate of return

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Reference no: EM132949090

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

Maturity (Years) YTM (%) 14.1% 25.1 36.1

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

Maturity (Years) YTM (%) 15.1% 26.1 37.1

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

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?

b-2. Is the market's expectation of the return on the 3-year bond greater or less than yours?

Reference no: EM132949090

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