The Difference Between the Forward Rate and the Expected Future

question 21

Multiple Choice

The difference between the forward rate and the expected future spot rate is called

• A) risk aversion.
• B) portfolio risk.
• C) induced risk.
• D) the risk premium.

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Definitions:

Human Behaviour

Encompasses a range of actions and mannerisms exhibited by humans, influenced by culture, attitudes, emotions, values, ethics, authority, rapport, hypnosis, persuasion, coercion, and genetics.

Null Hypothesis

Proposes that a prediction made from a given theory is false. Experiments (and other research strategies) are set up not to prove the worth of a theory, but rather to reject (or fail to reject) the null hypothesis. Thus, theories gain in strength because alternative explanations are rejected.

Experiment

A scientific procedure in which variables are manipulated and the effects on other variables are gauged. Large groups of subjects are generally used, and the results are analyzed statistically. In a true experiment, subjects are randomly assigned to experimental and control groups.

Rejection Hypothesis

The theory proposing that the experience of rejection, or anticipated rejection, by significant others or society can lead to negative psychological outcomes.