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The maturities and yields of three zero-coupon bonds are as follows: Maturity YTM 1 4% 2 5% 3 6% Next year, you expect the yields
The maturities and yields of three zero-coupon bonds are as follows:
Maturity | YTM |
1 | 4% |
2 | 5% |
3 | 6% |
Next year, you expect the yields on zero-coupon bonds to be as follows:
Maturity | YTM |
1 | 5% |
2 | 6% |
3 | 7% |
What is the market's expectation of the rate of return on a 3-year zero-coupon bond over the coming year, assuming the expectations hypothesis holds? Please express your answer in percent rounded to the nearest basis point.
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