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Question 1 According to the expectations theory of the term structure, it is better to invest in one-year bonds, reinvested over two years, than to

Question 1

According to the expectations theory of the term structure, it is better to invest in one-year

bonds, reinvested over two years, than to invest in a two-year bond if interest rates on one-year

bonds are expected to be the same in both years. Is this statement true, false, or uncertain?

Explain.

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