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a. What is the YTM of three-year zero-coupon bonds? b. What is the zero yield curve out to 4 years? (i.e. spot rates for 1,2,3
a. What is the YTM of three-year zero-coupon bonds? b. What is the zero yield curve out to 4 years? (i.e. spot rates for 1,2,3 and 4 years) c. What is the price of 2-year bonds paying a 7\% coupon? What is the bonds' YTM? d. If you purchase a bond as in (c) today, what is the expected return on your investment in the first year if the future one-year rate next year equals today's forward rate? e. What will be the return on your investment if the realized one-year rate next year is 6% ? f. What is the expected return on your investment in the first year if the market requires a 1% liquidity premium on a 2-year investment? g. According to the Expectations Hypothesis, what is the expected future short rate in the third year (i.e. in two years' time)
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