The Following Is a List of Prices for Zero-Coupon Bonds

question 7

Multiple Choice

The following is a list of prices for zero-coupon bonds with different maturities and par values of $1,000. According to the expectations theory, what is the expected forward rate in the third year?

• A)7.23%
• B)9.37%
• C)9.00%
• D)10.9%

Distinguish between the effects of price increases and decreases on budget constraints.

Understand how a budget constraint represents the trade-offs between different goods within a budget limit.

Grasp the concept of homogeneous products and their characteristics.

Appreciate the significance of income changes on consumer choice sets and budget constraints.

---

Definitions:

Expectancy Theory

A motivational theory suggesting that individual motivation to perform is influenced by the expectation that effort will lead to performance and performance to desired rewards.

Need For Affiliation

A psychological drive that motivates individuals to seek social connections, acceptance, and relationships with others.

Adams' Theory

Refers to Equity Theory, proposed by J. Stacy Adams, which suggests that individuals are motivated by fairness in their work relationships and will adjust their input to maintain equity.

Restoring Equity

The process of attempting to balance perceived disparities in fairness or distribution of resources within social or organizational contexts.