Dean of Students Office | Iowa State University

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%. ................
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