According to Expectations Theory If the 2 Year Interest Rate

question 17

Multiple Choice

According to expectations theory if the 2 year interest rate is 4% and the 1 year rate is now 3%, the 1 year rate next year is expected to be

• A) 8%.
• B) 5%.
• C) 4%.
• D) 3%.

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Definitions:

Investment Turnover

A measure of a company’s efficiency in using its assets to generate sales or revenue, indicating how quickly investments are converted into income.

Profit Margins

A financial metric that assesses the percentage of profit made from sales after all expenses have been deducted.

Return on Investment

A measure of the profitability of an investment, calculated by dividing the net gains from the investment by its cost.

Investment Turnover

A ratio measuring how efficiently a company generates sales from its inventory investments.