You observe the following term structure: Effective Annual YTM 1-year zero-coupon bond 6.1% 2-year zero-coupon bond 6.2 3-year zero-coupon bond 6.3 4-year zero-coupon bond 6.4 a. If you believe that...

You observe the following term structure:

a. 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?