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$8-$ Suppose the yield on a two$-$year Treasury secarity is $5\mathrm{.}83\%,$ and the yield on a five$-$ycar Treasury security is $6\mathrm{.}20\%.$ Assuming that the pure expectations theory is coerect, what is the market's estimate of the three$-$year Treasury rate two years from now?

a$.6\mathrm{.}45\%$

b$.5\mathrm{.}46\%$

c$.6\mathrm{.}53\%$

d$.6\mathrm{.}69\%$

The Unlversity of New Orieans Management

FIN $3300/$P$002$ Principles of Financial

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