The Expectations Theory of the Term Structure Asserts That

question 49

Multiple Choice

The expectations theory of the term structure asserts that

• A)short-term interest rates are always lower than long-term interest rates, since they have less risk
• B)long-term interest rates are always higher than short-term interest rates because you should always expect some inflation
• C)long-term interest rates are determined by the average of the current and future short-term interest rates
• D)the lower the liquidity of a security, the higher the yield it has to pay to attract financial investors
• E)foreign securities often have to pay a risk premium to compensate for exchange rate uncertainties

---

Definitions:

Reform Associations

are groups or organizations dedicated to advocating for changes and improvements in societal issues, government policies, and institutional practices.

Second Great Awakening

A Protestant religious revival in the United States during the early 19th century that led to the formation of new denominations and increased emphasis on social reforms.

German Immigrants

People from Germany who have relocated to another country, historically contributing significantly to cultural, economic, and demographic changes in their new countries.

Negative Stereotyping

The act of characterizing all members of a group in a consistently negative and oversimplified manner.