Suppose 1-Year Treasury Bonds Yield 4

question 82

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? Round the intermediate calculations to 4 decimal places and final answer to 2 decimal places.

• A) 6.21
• B) 7.39
• C) 7.27
• D) 5.47
• E) 6.09

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