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You have $1,000 to invest over an investment horizon of three years. The bond market...

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Finance

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You have $1,000 to invest over an investment horizon of three years. The bond market offers various options. You can buy () a sequence of three one-year bonds: (11) a three-year bond; or (ii) a two-year bond followed by a one-year bond. The current yield curve tells you that the one-year, two-year, and three-year yields to maturity are 2.5 percent 4 percent, and 2.7 percent respectively. You expect that one-year interest rates will be 5 percent next year and 5 percent the year after that. Assuming annual compounding. compute the return on each of the three investments. Instructions: Enter your responses rounded to the nearest two decimal places. Expected return for (0-0 % Expected return for (1)-O % Expected return for (1)

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