The yield to maturity on one-year zero-coupon bonds is 7.2%. The yield to maturity on two-year zero-coupon bonds is 8.2%.

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 % _______________