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

Maturity (years)	YTM
1	10	%
2	11
3	12

a. What are the implied one-year forward rates? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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 one-year zero-coupon bonds next year?

multiple choice

• There will be a shift upwards in next year's curve.

• There will be a shift downwards in next year's curve.

• There will be no change in next year's curve.

c. What will be the yield to maturity on two-year zeros? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

d. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? (Do not round intermediate calculations. Round your answer to the nearest whole percent.)

e. If you purchase a three-year zero-coupon bond now, what is the expected total rate of return over the next year? (Do not round intermediate calculations. Round your answer to the nearest whole percent.)