Rate of Return Assignment | Homework For You
June 3rd, 2020
The term structure for zero-coupon bonds is currently:
| Maturity (Years) | YTM (%) | |
| 1 | 4.2 | % |
| 2 | 5.2 | |
| 3 | 6.2 | |
Next year at this time, you expect it to be:
| Maturity (Years) | YTM (%) | |
| 1 | 5.2 | % |
| 2 | 6.2 | |
| 3 | 7.2 | |
a. What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond?(Round your answer to 1 decimal place.)
b-1. Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? (Round your answers to 2 decimal places.)
b-2. Is the market’s expectation of the return on the 3-year bond greater or less than yours?
- Greater
- Less. Get Finance homework help today
