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Could you please answer the entire question Assignment 06-Interest Rates 8. Pure expectations theory Aa Aa The pure expectations theory, or the expectations hypothess, asserts
Could you please answer the entire question
Assignment 06-Interest Rates 8. Pure expectations theory Aa Aa The pure expectations theory, or the expectations hypothess, 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 staterment true or false? The pure expectations theory assurnes that investors do not consider long term bonds to be riskier than short-term bonds True O False The yield on a one-year Treasury secunty is 4.6900%, and the two-year Treasury security has a 5.6300% 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? 6,5800% 7.5012% 5.5930% 8.3566% Recall that on a one-year Treasury security the yield is 4.6900% and 5.6300% 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 0.3000%, what is the market's estimate of the one-year Treasury rate one year from now? 0 5.9700% O 6.806096 5.0750% 7.5820% Suppose the yield on a two-year Treasury security is 5.83%, and the yield on a five-year Treasury security is 6.20%. Assuming that the pure expectations theory is correct, what is the market's estimate of the three-year Treasury rate two years from now? 6.45% 6.53% 6.61% 7.10%Step by Step Solution
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