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please answer all parts! 6. Pure expectations theory The pure expectations theory, or, the expectations hypothesis, asserts that long-term interest rates can be used to
please answer all parts!
6. Pure expectations theory 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 CD for one year followed by an investment in another one-year CD after one year. True Fatse The vield on a one-year treasucy security is 4.6900%, and the two-year Treasury security has a 6.3315% 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? (Note: Do not round your intermediate caiculations.) 9.1186% 10.1585% 7.9988% 6.799% Recall that on a one-year Treasury security the yield is 4.6900% and 6.3315% 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 0.25%. What is the market's estimate of the one-year Treasucy rate one year from now? (Note: Do not round your intermediate calculations.) 7.4915% 9.5142% 8.5403% 6.36789 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? (Note: Do not round your intermediate calculations.) 6.45% 7,10% 5.46% 6.53% Step by Step Solution
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