Based on the pure expectations theory, is the following statement true or false? A certificate of deposit (CD) for two years will have the same yield as a CD for one year followed by an Investment in another one-year CD after one year. True False The yield on a one-year Treasury security is 5.1500%, and the two-year Treasury security has a 7.7250% 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.) 8.8086% 11.8139% 13.1611% 10.3631% Recall that on a one-year Treasury security the yield is 5.1500% and 7.7250% 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 0.5%. What is the market's estimate of the one-year Treasury rate one year from now? (Note: Do not round your Intermediate calculations.) 7.9398% 10.6486% 9.3409% 11.8629% 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.) 6.45% 5.46% 6.53%
Based on the pure expectations theory, is the following statement true or false? A certificate of deposit (CD) for two years will have the same yield as a CD for one year followed by an Investment in another one-year CD after one year. True False The yield on a one-year Treasury security is 5.1500%, and the two-year Treasury security has a 7.7250% 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.) 8.8086% 11.8139% 13.1611% 10.3631% Recall that on a one-year Treasury security the yield is 5.1500% and 7.7250% 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 0.5%. What is the market's estimate of the one-year Treasury rate one year from now? (Note: Do not round your Intermediate calculations.) 7.9398% 10.6486% 9.3409% 11.8629% 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.) 6.45% 5.46% 6.53%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Based on the pure expectations theory, is the following statement true or false?
A certificate of deposit (CD) for two years will have the same yield as a CD for one year followed by an Investment in another one-year
CD after one year.
True
False
The yield on a one-year Treasury security is 5.1500%, and the two-year Treasury security has a 7.7250% 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.)
8.8086%
11.8139%
13.1611%
10.3631%
Recall that on a one-year Treasury security the yield is 5.1500 % and 7.7250% 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 0.5%. What is the market's estimate of the one-year Treasury rate one year
from now? (Note: Do not round your intermediate calculations.)
7.9398%
10.6486%
9.3409%
11.8629%
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.)
6.45%
5.46%
6.53%
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