1. Suppose 1-year Treasury bonds yield 4.00% while 2-year T-bonds yield 3.80%. 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. 3.60% B. 3.35% C. 2.77% D. 4.36% E. 4.10%
True or False
2. Increased leverage is associated with smaller amounts of fixed costs.
3. If an investment costs $ 100,000 and annually generates $ 25,000, the payback period is 4 years.