The pure expectations theory assumes that investors do not consider long-term bonds to be riskier than short-term bonds.

A. True

B. False

The yield on a one-year Treasury security is 4.9200%, and the two-year Treasury security has a 7.3800% yield. Assuming that the pure expectations theory is correct, what is the markets estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.)

A. 11.2833%

B. 12.57%

C. 8.413%

D. 9.8976%

Recall that on a one-year Treasury security the yield is 4.9200% and 7.3800% 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 0.3%. What is the markets estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.)

A. 9.2845%

B. 7.8918%

C. 10.5843%

D. 11.7913%

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 markets estimate of the three-year Treasury rate two years from now? (Note: Do not round your intermediate calculations.)

A. 6.53%

B. 7.10%

C. 5.46%

D. 6.45%