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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Definitions:

Surplus Production

The production of goods or services in quantities greater than needed for personal or local consumption, allowing for trade.

Primary Mode

The most prominent or frequently used method or form of something, particularly in the context of transportation or production.

Subsistence

The means by which an individual or group sustains life, usually referring to basic necessities like food and shelter.

Socioeconomic Systems

The structured ways societies organize and distribute economic resources and social status among their members.