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 riskier than short-term bonds. O True O False The yield on a one-year Treasury security is 5.3800%, and the two-year Treasury security has a 6.4560% 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 8.60 70% O 9.5885% 7.5500% O 6.4175% Recall that on a one-year Treasury security the yield is 5.3800% and 6.4560% 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? O 6.0775% 9.0805% 07.1500% O 8.1510% Suppose the yield on a two-year Treasury security is 4.2%, the on a five-year Treasury security 5.4%. Assuming that the pure expectations theory is correct, what is the market's estimate of the three-year Treasury rate two years from now? O 6.21% O 5.78% O 6.96% O 5.40%