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Question 2: The following is a list of prices for zero coupon bonds with different maturities and par value of $1,000. Maturity (Years) 1 2

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Question 2: The following is a list of prices for zero coupon bonds with different maturities and par value of $1,000. Maturity (Years) 1 2 Price $943.40 $881.68 $808.88 $742.09 3 4 a. What is, according to the expectations theory, the expected forward rate for one year in the third year f(3), in other words the rate quoted today for investment starting at t=3 for one year? b. What is, according to the expectations theory, the expected forward rate for one year in the second year f(2) in other words the rate quoted today for investment starting at t=2 for one year? What is the yield to maturity on a 3-year zero coupon bond? c

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