If the implied forward rates are realized, an investor that buys a six-month Treasury bill (and reinvests the proceeds every six months for five years) will produce the same number of dollars as an investment in a zero-coupon Treasury security at the five-year spot rate.

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The statement is true. If the implied forward rates hold true, the reinvestment of the proceeds every six months from a six-month Treasury bill will produce returns equal to the five-year spot rate of a zero-coupon Treasury security. This is a concept of the pure expectations theory of interest rates.

If the Implied Forward Rates Are Realized, an Investor That