Question: 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

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 a one-year bond purchased today will have the same return as a one-year bond purchased five years from now. False True The yield on a one-year Treasury security is 4.4600%, and the two-year Treasury security has a 5.3500% 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? 07.9375% 07.1250% O 5.3125% O 6.2500% Recall that on a one-year Treasury security the yield is 4.4600% and 5.3500% 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 0.2000%. What is the market's estimate of the one-year Treasury rate one year from now? O 6.6690% 0 4.9730% O 7.4300% O 5.8500% 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? 0 6.45% 06.61% 07.10% O 6.69%

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