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    Anticipate the yield on 1-year treasury 1-year from now

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    One year treasury securities yield 6.9 percent, while 2-year Treasury securities yield 7.2 percent. If the expectations theory is correct (that is, the maturity risk premium = 0) what does the market anticipate will be the yield on 1-year treasury securities on one year from now?

    a. 6.0%
    b. 6.7%
    c. 7.2%
    d. 7.5%
    e. 8.0%.

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    Solution Preview

    One year treasury securities yield 6.9 percent
    2-year Treasury ...

    Solution Summary

    The solution shows the calculation to arrive at the correct answer for the yield.