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Suppose the yield on a one-year zero-coupon bond is 9%. The yield on a two-year zero-coupon bond is 8%. You expect the one-year yield next

Suppose the yield on a one-year zero-coupon bond is 9%. The yield on a two-year zero-coupon bond is 8%. You expect the one-year yield next year to fall to 7.5%. Which of the following strategies would give you the highest expected HPR over one year? (a) Invest in the one-year bond (b) Invest in the two-year bond and sell after one year (c) The expected returns on a and b are equal (d) Impossible to tell

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