"According to the expectations theory of the term$$ structure, it is better to invest in$$ one$-$year bonds, reinvested over two$$ years, than to invest in a$$ two$-$year bond, if interest rates on$$ one$-$year bonds are expected to be the same in both$$ years." Is this statement$$ true, false, or$$ uncertain?

A$.$

$$True: The expected return on$$ one$-$year bonds, reinvested over two$$ years, is always higher at amount i Subscript t minus i Subscript t plus $1$ Superscript e$.$

B$.$

$$False: These investments are almost of the same profitability.

C$.$

$$Uncertain: The answer depends on whether we can ignore the left parenthesis i Subscript $2$ t Baseline right parenthesis squared and i Subscript t minus i Subscript t plus $1$ Superscript e values.

Which of the following would cause the risk premium on corporate bonds to fall$?$

A$.$Forecasters predict that the economy will grow more quickly for the next few years. nothing

Forecasters predict that the economy will grow more quickly for the next few years. nothing

B$.$There are fewer participants in the bond markets causing a reduction in the daily volume of transactions.

There are fewer participants in the bond markets causing a reduction in the daily volume of transactions.

C$.$

U$.$S$.$ Treasury bonds become more liquid.

D$.$

There is an increase in brokerage commissions.