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6. Pure expectations theory 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 assume 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 4.0000 %, and the two-year Treasury security has a 5.4000% 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.) 5.796% 8.6599% 7.7734% 6.8188% rity, Suppose the one-year security does Catalog and Study Tools Rental Options College Success Tips Career Success Tips Help Give Feedback 1:173446 6.8188% Recall that on a one-year Treasury security the yield is 4.0000 % and 5.4000% 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 0.3%. What is the market's estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.) 003 6.2116% 5.2799% 7.8887% 7.0812% 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? (Note: Do not round your Intermediate calculations.) 6.61% 7.10% 6.69% 6.45% Grade It Now Save & Continue

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