u/Horror-Expert-1922

https://preview.redd.it/5x2f4lai4k0h1.png?width=1602&format=png&auto=webp&s=ab59b2229d9d31ba70ce996d6733df178d75a90c

If forward rates evolve as predicted, then the annualized return from holding the bond for N years will equal N year risk free rate. For example, I buy a 4 year bond, in this example I would earn the 2 year spot rate if I held the bond for 2 years.

I am confused as to the annualized return if rates remain unchanged? For this example, if I buy a 4 year bond and hold it for 1 year, would I earn 2.25%?

Any clarification is appreciated. Happy Studying!