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a. Assuming that the expectations hypothesis is valid, compute the expected price of the four-year zero coupon bond shown below at the end of (i)
a. Assuming that the expectations hypothesis is valid, compute the expected price of the four-year zero coupon bond shown below at the end of (i) the first year; (ii) the second year; (iii) the third year; (iv) the fourth year. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. What is the rate of return of the bond in years 1,2,3, and 4 ? Conclude that the expected return equals the forward rate for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. Assuming that the expectations hypothesis is valid, compute the expected price of the four-year zero coupon bond shown below at the end of (i) the first year; (ii) the second year; (iii) the third year; (iv) the fourth year. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. What is the rate of return of the bond in years 1,2,3, and 4 ? Conclude that the expected return equals the forward rate for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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