For This Question,assume That One-Year and Two-Year Bonds Have the Same

Multiple Choice

For this question,assume that one-year and two-year bonds have the same risk; therefore,you can ignore risk here.Assuming that there is arbitrage between one-year bonds and two-year bonds,we know that the expected rate of return on two-year bonds

A) will equal the expected rate of return from holding a one-year bond for one year.
B) will equal the expected rate of return from holding a one-year bond for two years.
C) will be larger than the expected rate of return from holding a one-year bond for one year.
D) will be smaller than the expected rate of return from holding a one-year bond for one year.
E) will be exactly half the rate of return on one-year bonds.