Firm believer in pure expectation yield curve theory

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Reference no: EM132001614

The 3M spot rate is 6% and the 6M spot rate is 5%. As a firm believer in pure expectation yield curve theory, which statement best reflects your beliefs about the 3M rate that will apply in 3 months time? and why?

a) less than 5%

b) between 5 and 6%

c) greater than 6%

d) depends on my own expectation

2. Which one of the following stocks will have the highest expected return?

Stock A, B, C, D, E

Standard deviation 32%, 46%, 67%, 38%, 41%

Beta .8, 1.1, .9, 1.2, 1.3

A. Stock A.

B. Stock B.

C. Stock C.

D. Stock D.

E. Stock E.

Reference no: EM132001614

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