If you believe that the term structure next year will be the same as today’s, will the 1-year
January 3rd, 2018
You observe the following term structure:Effective Annual YTM1-year zero-coupon bond6.1%2-year zero-coupon bond6.23-year zero-coupon bond6.34-year zero-coupon bond6.4a. If you believe that the term structure next year will be the same as today’s, will the 1-year or the 4-year zeros provide a greater expected 1-year return?b. What if you believe in the expectations hypothesis?