Question 7: 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? The pure expectations theory assumes that investors do not consider long-term bonds to be riskier than short-term bonds. A. True a B. False The yield on a one-year Treasury security is 4.6900%, and the two-year Treasury security has a 6.3300% 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? A. 6.8000% B. 9.1200% C. 8.0000% D. 10.1600% Exam Question 8: To be effective issuing and investing in bonds, knowledge of their terminology, characteristics, and features is essential. Fill in the blanks with one of the four following terms: coupon payment, sinking fund provision, call provision, and default. A bond's LA refers to the interest payment or payments paid by a bond. A bond issuer is said to be in if it does not pay the interest or the principal in accordance with the terms of the indenture agreement or if it violates one or more of the issue's restrictive covenants. A bond contract feature that requires the issue to retire a specified portion of the bond issue each year is called a A bond's Id gives the issuer the right to call, or redeem, a bond at specific times and under specific conditions. Question 9: Coupon payments are fixed, but the percentage return that investors receive varies based on market conditions. This percentage return is referred to as the bond's yield. Consider the case of RTE Inc.: RTE Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $1,190.35. However, RTE Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on RTE Inc.'s bonds? Value YTM | YTC