B7. You see an upward sloping term structure of interest rates and you believe that the upward slope of the yield curve results from the liquidity premium that investors demand for holding longer maturity debt. You see that risk-free government zero-coupon bonds have the following yields: Time to Maturity 180 days 1 year 2 years 3 years 4 years 5 years 6 years 7 years 8 years 9 years 10 years Yield 1.00% 1.25% 1.50% 2.00% 2.50% 3.00% 4.00% 4.25% 4.50% 5.25% 6.00% B7a. If the yield curve does not change over time, what is your annualized buy and hold return if you buy a 5 year zero, but sell it after 2 years? If necessary, you may assume that the face value of these zeros is $100 (5 marks] B7b. If it turns out that the expectations hypothesis is true and not the liquidity premium hypothesis, as you assumed in B7a), what is your expected return? [3 marks] B7. You see an upward sloping term structure of interest rates and you believe that the upward slope of the yield curve results from the liquidity premium that investors demand for holding longer maturity debt. You see that risk-free government zero-coupon bonds have the following yields: Time to Maturity 180 days 1 year 2 years 3 years 4 years 5 years 6 years 7 years 8 years 9 years 10 years Yield 1.00% 1.25% 1.50% 2.00% 2.50% 3.00% 4.00% 4.25% 4.50% 5.25% 6.00% B7a. If the yield curve does not change over time, what is your annualized buy and hold return if you buy a 5 year zero, but sell it after 2 years? If necessary, you may assume that the face value of these zeros is $100 (5 marks] B7b. If it turns out that the expectations hypothesis is true and not the liquidity premium hypothesis, as you assumed in B7a), what is your expected return? [3 marks]