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2 . The price of zero coupon bonds give you the following forward rates ( 3 points ) Year Forward rated 1 5 % 2

2. The price of zero coupon bonds give you the following forward rates (3 points)
Year Forward rated
15%
26.5%
38%
49%
i) What is the price of a zero coupon bond that is purchased today and matures in 2 years? What is the expected total rate of return?
ii) What is the price of a 4 year 6% coupon bond, par value $1000? If you purchased at that price, what would your total expected rate of return be over the 4 year period.
iii) Under the expectations hypothesis, what is the expected realized coupon yield of the coupon bond?

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