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The pure expectations theory assumes that a one-year bond purchased today will have the same return as a one-year bond purchased five years from now.
The pure expectations theory assumes that a one-year bond purchased today will have the same return as a one-year bond purchased five years from now. False True The yield on a one-year Treasury security is 5.1500%, and the two-year Treasury security has a 6.9500% 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? 11.1506% 7.4630% 8.7800% 10.0092% Recall that on a one-year Treasury security the yield is 5.1500% and 6.9500% 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 0.3500%. What is the market's estimate of the one-year Treasury rate one year from now? 10.2490% 9.2000% 8.0700% 6.8600%
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