1. [8pts] Assume the following yield curve for zero-coupon bonds with a face value of 100:

Maturity	YTM
1 Year	7%
2 Years	8%
3 Years	8%
4 Years	7%
5 Years	6%

(1) [4pts] Using implied forward rates, estimate the yield curve one-year from the present (rates on one-year, two-year, three-year, and four-year bonds).

(2) [4pts] If you bought the three-year bond and held it for one year, what would your expected rate of return be if your calculations were based on implied forward rates?