The current yield curve for default-free zero-coupon bonds is as follows: Maturity (years) YTM 1 10% 2 11% 3 12% a) What are the in 1 year for 1 year and in 2 years for 1 year forward rates? (10 pts) b) Assume that the expectations hypothesis of the term structure is correct. If market expectations are accurate, what will the yield curve (that is, the yields to maturity on one- and two-year zero-coupon bonds) be next year? (10 pts) c) Assume again that the expectations hypothesis of the term structure is correct. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (10 pts) 2. A bond issued by XYZ Corporation with a face value of $1,000 sells for $960, matures in five years, and has a 7% coupon rate with semiannual payments. An investor has a three-year horizon and can reinvest coupons at an APR of 6% (with semiannual compounding) over this period. What is the (annualized) realized return for this investor if at the end of the three years the bond trades at a 7% yield to maturity? (10 pts)