The current yield curve for default-free zero-coupon bonds is as follows:
Maturity(years)YTM
1 10.0%
2 11.0%
3 12.0%
3. If you purchase a two-year zero-coupon bond now, what is the expected total rate of return over the next year? What if you purchase a three year zero coupon bond? (Hint: compute the current and expected future prices.)