Assuming That the Term Structure of Interest Rates Is Determined

question 17

Multiple Choice

Assuming that the term structure of interest rates is determined as posited by the pure expectations theory,which of the following statements is CORRECT?

• A) In equilibrium,long-term rates must be equal to short-term rates.
• B) An upward-sloping yield curve implies that future short-term rates are expected to decline.
• C) The maturity risk premium is assumed to be zero.
• D) Inflation is expected to be zero.
• E) Consumer prices as measured by an index of inflation are expected to rise at a constant rate.

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Definitions:

Consumer Code

Guidelines or regulations designed to protect the rights and interests of consumers in the marketplace.

Consumer Bill of Rights

A set of principles and guidelines established to protect consumers from unfair business practices, including the right to safety, information, choice, and to be heard.

Greenwashing

The practice of making misleading or unsubstantiated claims about a product's environmental benefits to appeal to eco-conscious consumers.

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The positive effects on the natural environment from certain actions, policies, or products, such as air and water quality improvement and biodiversity conservation.