The Expectations Hypothesis Cannot Explain Why

question 28

Multiple Choice

The expectations hypothesis cannot explain why:

• A) yields on securities of different maturities move together.
• B) short-term yields are more volatile than long term yields.
• C) yield curves usually slope upward.
• D) long-term bonds usually are less liquid than short-term bonds with the same default risk.

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Definitions:

Gigantism

A condition characterized by excessive growth and height significantly above average due to an overproduction of growth hormone.

Pineal Body

A small endocrine gland in the brain that produces melatonin, a hormone that regulates sleep patterns.

Melatonin

A hormone produced by the pineal gland in the brain, responsible for regulating sleep-wake cycles.

Biological Clock

An internal mechanism in living organisms that controls the timing of various biological functions, such as sleep-wake cycles, reproductive cycles, and metabolism.