$1,000 par value zero-coupon bonds (ignore liquidity premiums).

Bond Years to Maturity Yield to Maturity
A 1 6.00%
B 2 7.50%
C 3 7.99%
D 4 8.49%
E 5 10.70%

The expected 1-year interest rate 1 years from now should be

a. 6%
b. 7.5%
c. 9.02%
d. 10.70%

10.70% - Option D

Explanation:

One-year interest rate one year from now:

= 1.625625 divide by 0.16

=10.160

Therefore, an approximate answer is 10.70%

Respect Maturity (YTM) – in any case alluded to as recovery or book yield – is the theoretical pace of return or loan cost of a fixed-rate security, for example, a security. The YTM depends on the conviction or understanding that a financial specialist buys the security at the present market cost and holds it until the security has developed (arrived at its full worth), and that all premium and coupon installments are made in a convenient manner.

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