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7 10. Suppose the current 1-year and 2-year yields are given as y1.-3% and 72.4%. Assume that the expectation hypothesis (EH) holds. a) (5 points)

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7 10. Suppose the current 1-year and 2-year yields are given as y1.-3% and 72.4%. Assume that the expectation hypothesis (EH) holds. a) (5 points) What is the future expected 1-year yield, E[y101)? b) (5 points) What is the 1-year HPR of a 2-year zero coupon bond (ZCB)? c) (5 points) What is the 1-year HPR of a 1-year ZCB? d) (10 points) What can be misleading about the EH? Explain in fewer than three lines using your answers in (b) and (c)

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