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32. Assuming the pure expectations theory is correct, which of the following statements is CORRECT? O a. If 1-year rates are 6% and 2-year rates
32.
Assuming the pure expectations theory is correct, which of the following statements is CORRECT? O a. If 1-year rates are 6% and 2-year rates are 7%, then the market expects 1-year rates to be 6.5% in one year. O b. Interest rate (price) risk and reinvestment rate risk are relevant to investors in corporate bonds, but these concepts do not apply to Treasury bonds. O c. 2.year Treasury bond rates exceed 1 year rates, then the market must expect interest rates to rise. O d. If both 2 year and 3-year Treasury rates are 79, then 5 year rates must also be 7%. O e Reinvestment rate risk is higher on long-term bonds, and interest rate (price) nisk is higher on short term bonds Step by Step Solution
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