The yield to maturity on one-year zero-coupon bonds is 7%. The yield to maturity on two-year zero-coupon bonds is 8%. a. What is the forward rate of interest for the second year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) orward 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 ity preference theory you believe in the 1 onte mi terest rete s your best guesses to next years s higher or lower than in (b)? hi O Lower OHigher