The Expectations Theory of the Term Structure of Interest Rates

question 31

Multiple Choice

The expectations theory of the term structure of interest rates states that

• A)forward rates are determined by investors' expectations of future interest rates.
• B)forward rates exceed the expected future interest rates.
• C)yields on long- and short-maturity bonds are determined by the supply and demand for the securities.
• D)All of the options are correct.

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Definitions:

Scrap Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Units-Of-Production Method

A method for determining depreciation that distributes depreciation based on how much the asset is used.

Scrap Value

Scrap value is the estimated residual value of an asset at the end of its useful life, typically in terms of its material components.

Scrap Value

The estimated residual value of an asset at the end of its useful life, often considered when an asset is to be disposed of or recycled.