The term structure for zero-coupon bonds is currently: ...
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Accounting
| The term structure for zero-coupon bonds is currently: |
| Maturity (Years) | YTM (%) |
| 1 | 4.3% |
| 2 | 5.3 |
| 3 | 6.3 |
| Next year at this time, you expect it to be: |
| Maturity (Years) | YTM (%) |
| 1 | 5.3% |
| 2 | 6.3 |
| 3 | 7.3 |
| 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 2 decimal places. Omit the "%" sign in your response.) |
| 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. Omit the "%" sign in your response.) |
| Maturity | YTM |
| 1 | % |
| 2 | % |
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