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The yield to maturity on one - year zero - coupon bonds is 8 . 1 % . The yield to maturity on two -

The yield to maturity on one-year zero-coupon bonds is 8.1%. The yield to maturity on two-year zero-coupon bonds is 9.1%.
Required:
a. What is the forward rate of interest for the second year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Forward rate of interest
b. If you believe in the expectations hypothesis, what is your best guess as to the expected value of the short-term interest rate next year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Short-term interest rate %
c. If you believe in the liquidity preference theory, is your best guess as to next year's short-term interest rate higher or lower than in (b)?
Lower
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