1. Suppose that the annual interest rate this year is 5%, and financial markets participants expect the annual interest rate to increase to 5.5% next year and to 6% two years from now and to 6.5% three years from now. Determine the yield to maturity on the three year bond.
2. a)5%
3. b)5.25%
4. c)5.5%
5. d)6%
6. e)None of the above