The current yield curve for default$-$free zero$-$coupon bonds is as follows:

a$.$ What are the implied $1-$year forward rates?

b$.$ Assume that the pure expectations hypothesis of the term structure is correct. If market expectations are accurate, what will be the

yield to maturity on $1-$year zero$-$coupon bonds next year?

c$.$ Assume that the pure expectations hypothesis of the term structure is correct. If market expectations are accurate, what will be the

yield to maturity on $2-$year zero$-$coupon bonds next year?

d$.$ If you purchase a $2-$year zero$-$coupon bond now, what is the expected total rate of return over the next year? $($Hint: Compute the

current and expected future prices.$)$ Ignore taxes.

e$.$ What is the expected total rate of return over the next year on a $3-$year zero$-$coupon bond?

f$.$ What should be the current price of a $3-$year maturity bond with a $8\mathrm{.}5\%$ coupon rate paid annually?

g$.$ If you purchased the coupon bond at the price you computed in part $(f).$ what would your total expected rate of return be over the

next year $($coupon plus price change$)?$ Ignore taxes.