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Annualized rate of return of 2year of 12% QUESTION 2 Assume expectations hypothesis is true. Today, a 1-year bond has an annualized rate of return

Annualized rate of return of 2year of 12%image text in transcribed

QUESTION 2 Assume expectations hypothesis is true. Today, a 1-year bond has an annualized rate of return of 10% per year. A 2-year bond has an annualized rate of retur per year. A 3-year bond has an annualized rate of return of 15% per year. What is the forward rates for a 1-year bond in the second year? 21.2% 20.4% 25.9% 14.0%

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