M CONNECT G Gramma Saved es 5 & 6) i The current yield curve for default-free zero-coupon bonds is as follows: Maturity ( Years) YTM (8 ) W N 5.08 6.0 8.0 The face value of the bond is $1000. a. What are the implied 1-year forward rates? (Do not round intermediate calculations. Round y Omit the "%" signs in your response.) Maturity Forward Rate 2 years 3 years b. Assume that the pure expectations hypothesis of the term structure is correct. If market expectat pure yield curve (that is, the yields to maturity on 1- and 2-year zero-coupon bonds) next year? O Shift downward O Shift upward c. If you purchase a 2-year zero-coupon bond now, what is the expected total rate of return over the ne 3-year zero-coupon bond? (Hint: Compute the current and expected future prices.) Ignore taxes. (Do no calculations. Round intermediate "Price" and final answers to 2 decimal places. Omit the "$" & "%" s Expected Total 2-year bond Rate of Return 3-year bond