Suppose 1-year Treasury bonds yield 4.00% while 2-year T-bonds yield 4.90%. Assuming the pure expectations...
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Suppose 1-year Treasury bonds yield 4.00% while 2-year T-bonds yield 4.90%. 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.
Group of answer choices
5.11%
4.65%
6.91%
5.81%
5.05%
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