Suppose that now is August 2006 and we have the following zero-coupon bonds:
Maturity: August 2007, Price: 95,53
Maturity: August 2008, Price: 91,07
Maturity: August 2009, Price: 86,2
Maturity: August 2010, Price: 81,08
Would you expect the yield on a non-zero coupon bond maturing in August 2010 to be higher or lower than the yield on the 2010 zero-coupon bond?
I think we should somehow use the fact that if we calculate the yields on these zero-coupon bonds then the term structure will be upward-sloping. By the expectations hypothesis, an upward sloping yield curve implies that the market is expecting higher spot rates in the future. But I don't know what conclusion we can draw about non-zero coupon bond yield from it.