Which Fact About the Term Structure Is the Expectations Theory

question 63

Multiple Choice

Which fact about the term structure is the expectations theory able to explain?

• A) Why interest rates on bonds with different terms to maturity tend to move together over time.
• B) Why yields on short-term bonds are more volatile than yields on long-term bonds.
• C) Why longer-term yields tend to be higher than shorter-term yields.
• D) Why long-term bonds usually are less liquid than short-term bonds with the same default risk.

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Definitions:

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Trend Line

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Ancient monumental structures located in Egypt, serving as tombs for pharaohs and a testament to Egyptian architectural skill.