The yields of four zero-coupon bonds of varying maturities are as follows:
If you expect the implied term structure to be the same next year as it is this year, what is the expected return on the 1-year zero-coupon bond over the coming year? Please express your answer in percent, rounded to the nearest basis point.
Yield on Zero Coupon rates represent spot interest rates for the corresponding terms.
Expected return on 1-year zero coupon bond over the coming year is the forward rate for 1 year, after one year from now, ascertained at 6.30% as follows:
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