What is the shape of the yield curve given the data on the three ...

[burton19126]

Question 1

The yield on a 1-year zero coupon bond selling today is 2%. The market expects that similar bonds sold in one year's time will yield 3%. According to the expectations theory, a 2-year zero coupon bond for sale today should have a yield of
◦ 2.0%.
◦ 2.5%.
◦ 2.75%.
◦ 3.0%.
◦ 5.0%.

Question 2

What is the shape of the yield curve given the data on the three zero coupon bonds in the table below? (Assume that each bond has a face value of $1,000.)

Term	Price	Yield
1 Year	$935	7%
2 Years	$882	6.5%
3 Years	$840	6%

◦ Downward sloping
◦ Upward then downward sloping
◦ Downward then upward sloping
◦ Upward sloping
◦ Flat

[maya.nigrin17@yahoo.com]

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[burton19126]

Thanks for the timely response, appreciate it

[amcvicar]

Wow, this really help