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%

a. Using implied forward rates estimate the yield curve one year from the present (rates on 1-year, 2-year, 3-year and 4-year bonds). b. Using implied forward rates estimate the yield curve two years from the present (rates on 1-year, 2-year, and 3-year bonds). c. If you bought the three-year bond and held it one year, what would your expected rate of return be if your expectations were based on implied forward rates?