A certificate of deposit $($CD$)$ for two years will have the same yield as a CD for one year followed by an investment in another one$-$year CD after one year.

True

False

The yield on a one$-$year Treasury security is $5\mathrm{.}3800\%,$ and the two$-$year Treasury security has a $8\mathrm{.}0700\%$ 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? $($Note: Do not round your intermediate calculations.$)$

$13\mathrm{.}7523\%$

$10\mathrm{.}8286\%$

$9\mathrm{.}2043\%$

$12\mathrm{.}3446\%$

Recall that on a one$-$year Treasury security the yield is $5\mathrm{.}3800\%$ and $8\mathrm{.}0700\%$ 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 $0\mathrm{.}25\%.$ What is the market$$s estimate of the one$-$year Treasury rate one year from now? $($Note: Do not round your intermediate calculations.$)$

$10\mathrm{.}3165\%$

$8\mathrm{.}769\%$

$11\mathrm{.}7608\%$

$13\mathrm{.}102\%$

Suppose the yield on a two$-$year Treasury security is $5\mathrm{.}83\%,$ and the yield on a five$-$year Treasury security is $6\mathrm{.}20\%.$ Assuming that the pure expectations theory is correct, what is the market$$s estimate of the three$-$year Treasury rate two years from now? $($Note: Do not round your intermediate calculations.$)$

$6\mathrm{.}69\%$

$6\mathrm{.}61\%$

$5\mathrm{.}46\%$

$6\mathrm{.}45\%$