Business, 19.12.2019 03:31 anthonylemus36

Assuming the pure expectations theory is correct, which of the following statements is correct?

a. if 2-year treasury bond rates exceed 1-year rates, then the market must expect interest rates to rise.
b. if both 2-year and 3-year treasury rates are 7%, then 5-year rates must also be 7%.
c. reinvestment rate risk is higher on long-term bonds, and interest rate (price) risk is higher on short-term bonds.
d. if 1-year rates are 6% and 2-year rates are 7%, then the market expects 1-year rates to be 6.5% in one year. e. interest rate (price) risk and reinvestment rate risk are relevant to investors in corporate bonds, but these concepts do not apply to treasury bonds.

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Assuming the pure expectations theory is correct, which of the following statements is correct?

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