Suppose 1-Year Treasury Bonds Yield 4

question 17

Multiple Choice

Suppose 1-year Treasury bonds yield 4.00% while 2-year T-bonds yield 5.10%.Assuming the pure expectations theory is correct,and thus the maturity risk premium for T-bonds is zero,what is the yield on a 1-year T-bond expected to be one year from now?

• A)5.90%
• B)6.21%
• C)6.52%
• D)6.85%
• E)7.19%

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