According to the Expectations Theory of the Term Structure

question 3

Multiple Choice

According to the expectations theory of the term structure

• A)the interest rate on long-term bonds will exceed the average of short-term interest rates that people expect to occur over the life of the long-term bonds,because of their preference for short-term securities.
• B)interest rates on bonds of different maturities move together over time.
• C)buyers of bonds prefer short-term to long-term bonds.
• D)buyers require an additional incentive to hold long-term bonds.

---

Definitions:

Willingness

The state of being prepared to do something; readiness or inclination to engage in an activity or process.

Behaviors

Observations of individual actions and responses, often studied in psychology to understand and predict human interactions.

Values

Core principles or beliefs that guide behavior and decision-making.

Individuals

Separate persons considered separately from a group or collectively.