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

False

The yield on a one$-$year Treasury security is $4\mathrm{.}0000\%,$ and the two$-$year Treasury security has a $6\mathrm{.}0000\%$ 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? $($Note: Do not round your intermediate calculations.$)$

$8\mathrm{.}0385\%$

$10\mathrm{.}2089\%$

$6\mathrm{.}8327\%$

$9\mathrm{.}1639\%$

Recall that on a one$-$year Treasury security the yield is $4\mathrm{.}0000\%$ and $6\mathrm{.}0000\%$ 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 $0\mathrm{.}15\%.$ What is the market$$s estimate of the one$-$year Treasury rate one year from now? $($Note: Do not round your intermediate calculations.$)$

$8\mathrm{.}8155\%$

$7\mathrm{.}7329\%$

$6\mathrm{.}573\%$

$9\mathrm{.}8208\%$

Suppose the yield on a two$-$year Treasury security is $5\mathrm{.}83\%,$ and the yield on a five$-$year Treasury security is $6\mathrm{.}20\%.$ Assuming that the pure expectations theory is correct, what is the market$$s estimate of the three$-$year Treasury rate two years from now? $($Note: Do not round your intermediate calculations.$)$

$7\mathrm{.}10\%$

$6\mathrm{.}45\%$

$5\mathrm{.}46\%$

$6\mathrm{.}69\%$