Suppose that an investor observes the following prices and yields to maturity on zero-coupon government bonds:
Maturity	Price	Yield-to-Maturity
1 year	97.50	2.548%
2 years	94.25	2.983
3 years	91.75	2.891

1. Compute the 1y1y and 2y1y implied forward rates, stated on a semiannual bond basis.

2. The investor has a three-year investment horizon and is choosing between buying the two-year zero and reinvesting in another one-year zero in two years or buying and holding to maturity the three-year zero. The investor decides to buy the two-year bond. Based on this decision, what is the minimum YTM the investor expects on one-year zeros two years from now?