It is accurate to say that the pure expectations theory makes the assumption that investors do not think long-term bonds are more risky than short-term bonds.
Based on the current long-term interest rates, expectations theory aims to forecast what short-term interest rates will be in the future. According to the hypothesis, an investor would make the same amount of interest by purchasing two consecutive one-year bonds as opposed to one two-year bond today. The "unbiased expectations theory" is another name for the hypothesis. With the use of a projection of future interest rates, the expectations theory tries to assist investors in making decisions. The theory predicts the rate for short-term bonds using long-term rates, often from government bonds.
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