In: Finance
Given the YTMs of zero-coupon bonds of four maturities below and assuming the expectations hypothesis holds, calculate the yield on a three-year bond expected to obtain at the end of year 1. Please enter your answer in percent rounded to the nearest basis point.
Maturity | YTM |
1 | 5% |
2 | 6% |
3 | 6.5% |
4 | 7% |
Please refer to the image below for the solution-
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