8. Pure expectations theory The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates Based on the pure expectations theory, is the following statement true or false? The pure expectations theory assumes that investors do not consider long-term bonds to be riskler than short-term bonds. Trud False The yield on a one-year Treasury security is 4.4600%, and the two-year Treasury security has a 6.6900% yield. Assuming that the pure expectations theory is correct, what is the market's estimate of the one-year Treasury rate one year from now? O 7.6245% 10.2258% 11.3919% O 8.9700% Recall that on a one-year Treasury security the yield is 4.4600% and 6.6900% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.2%. What is the market's estimate of the one-year Treasury rate one year from now? 7.2760% 8.5600% 10.8712% 9.7584% Suppose the yield on a two-year Treasury security is 4.7%, and the yield on a five-year Treasury security is 5.8%. Assuming that the pure expectations theory is correct, what is the market's estimate of the three-year Treasury rate two years from now? 6.54% O 7.32% 6.08% 5.59%