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The yield on a one-year Treasury security is 4.2300%, and the two-year Treasury security has a 6.3500% yield. Assuming that the pure expectations theory is
The yield on a one-year Treasury security is 4.2300%, and the two-year Treasury security has a 6.3500% 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? 10.8077% 9.7014% 8.5100% 7.2335% Recall that on a one-year Treasury security the yield is 4.2300% and 6.3500% 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 0.1500%. What is the market's estimate of the one-year Treasury rate one year from now? 9.3480% 10.4140% 8.2000% 6.9700%
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