more 5. Pure expectations theory Aa Aa 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? A certificate of deposit (CD) for two years will have the same yield as a co 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 5.6100%, and the two-year Treasury security has a 7.5700% 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? 0 12.1412% 9.5600% 8.1260% 10.8984% Recall that on a one-year Treasury security the yield is 5.6100% and 7.5700% 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 0.4500%. What is the market's estimate of the one-year Treasury rate one year from now? 10.9860% O 8.6500% 07.3530% 9.8610% 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? O 6.69% 6.61% 6.45% O 6.53%