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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
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 True O False The yield on a one-year Treasury security is 4.6900%, and the two-year Treasury security has a 7.0400% 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? 10.7730% 8.0325% O 12.0015% 9.450096 Recall that on a one-year Treasury security the yield is 4.6900% and 7.0400% 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 0.2000%, what is the market's estimate of the one-year Treasury rate one year from now? 9.040096 7.6840% O 10.3060% 11.4810% 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? 6.53% 5.46% 6.45% 6.61% O
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