You observe the following term structure:

	Effective Annual YTM
1-year zero-coupon bond	4.3%
2-year zero-coupon bond	4.4
3-year zero-coupon bond	4.5
4-year zero-coupon bond	4.6

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

One year return on 1 year bond	%
One year return on 4 year bonds	%

a-2.

Will the 1-year or the 4-year zeros provide a greater expected 1-year return?

	1-year zero-coupon bond
	4-year zero-coupon bond