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You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond 8.0 % 2-year zero-coupon bond 8.1 3-year zero-coupon bond 8.2 4-year zero-coupon bond

You observe the following term structure:

Effective Annual YTM
1-year zero-coupon bond 8.0 %
2-year zero-coupon bond 8.1
3-year zero-coupon bond 8.2
4-year zero-coupon bond 8.3

a. If you believe that the term structure next year will be the same as todays, calculate the return on (i) the 1-year zero and (ii) the 4-year zero. (Do not round intermediate calculations. Round your answers to 1 decimal place.)

b. Which bond provides a greater expected 1-year return?

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