Oshkosh Insurance manages their money based on the Pure Expectations Theory. Oshkosh Insurance recently hired you to manage $35 million in U.S. Treasuries. Oshkosh Insurance wants the money invested for two years at which time they will sell the Treasury securities and use the money for a new corporate headquarters. You have one of four options:

(i) Buy Treasuries with six-months to maturity and reinvest the funds every six months into new Treasuries with six-months to maturity.

(ii) Buy Treasuries with one-year to maturity and reinvest the funds into new Treasuries with one-year to maturity.

(iii) Buy Treasuries with two years to maturity and redeem the Treasuries at year two.

(iv) Buy Treasuries with five years to maturity and sell the Treasuries at year two.

What ONE option would you select? Explain your answer.

Is there ONE option you should avoid? Explain your answer.