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Which of the following is consistent with the pure expectations theory of the yield curve? Check all that apply. O A flat yield curve suggests
Which of the following is consistent with the pure expectations theory of the yield curve? Check all that apply. O A flat yield curve suggests that the market thinks interest rates in the future will be lower than they are today. A downward-sloping yield curve suggests that the market thinks interest rates in the future will be lower than they are today. An upward-sloping yield curve suggests that the market thinks interest rates are going to be lower in the future than they are today. A flat yield curve suggests that the market thinks interest rates in the future will be the same as they are today. Bob would like to invest a certain amount of money for two years and considers investing in a one-year bond that pays 5 percent and a two-year bond that pays 8 percent. Bob is considering the following investment strategies: Strategy A: Buy a one-year bond that pays 5 percent and in year one, buy another one-year bond that pays the forward rate in year two. Strategy B: Buy a two-year bond, in year one, that pays 8 percent in the first year and 8 percent in the second year. If the one-year bond purchased in year two pays 9 percent, Bob will choose Which of the following describes conditions under which Bob would be indifferent between Strategy A and Strategy B? The rate on the one-year bond purchased in year two pays 10.421 percent. The rate on the one-year bond purchased in year two pays 11.086 percent. The rate on the one-year bond purchased in year two pays 11.529 percent. The rate on the one-year bond purchased in year two pays 11.973 percent
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