Assuming the Pure Expectations Theory Is Correct,which of the Following

question 49

Multiple Choice

Assuming the pure expectations theory is correct,which of the following statements is CORRECT?

• A) If 2-year Treasury bond rates exceed 1-year rates,then the market must expect interest rates to rise.
• B) If both 2-year and 3-year Treasury rates are 7%,then 5-year rates must also be 7%.
• C) If 1-year rates are 6% and 2-year rates are 7%,then the market expects 1-year rates to be 6.5% in one year.
• D) Reinvestment rate risk is higher on long-term bonds,and interest rate (price)risk is higher on short-term bonds.
• E) Interest rate (price)risk and reinvestment rate risk are relevant to investors in corporate bonds,but these concepts do not apply to Treasury bonds.

Understand the concepts of incremental revenue and incremental costs in the context of special orders.

Recognize the relevancy of cost and revenue information in making outsourcing decisions.

Understand the strategies for emphasizing positive information and de-emphasizing negative information in professional communications.

Identify and avoid the use of negative words or expressions in professional writing.

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