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Interest rates on 1-year, 2-year, and 3-year Treasury bills are 5%, 6%, and 7% respectively. Assume that the pure expectations theory holds and that the

Interest rates on 1-year, 2-year, and 3-year Treasury bills are 5%, 6%, and 7% respectively. Assume that the pure expectations theory holds and that the market is in equilibrium. Which of the following statements is most correct? a. The maturity risk premium is positive. [CH-5] b. Interest rates are expected to rise over the next two years. c. The market expects one-year rates to be 5.5% one year from today. d. Answers a, b, and c are all correct. e. Only answers b and c are correct. Select one: a b c d e

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