Which Fact About the Term Structure Is the Expectations Theory

question 107

Multiple Choice

Which fact about the term structure is the expectations theory unable 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 bond yields are influenced by expected future short-term bond yields.

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Definitions:

Alkene

A hydrocarbon containing at least one carbon-carbon double bond, characterized by the general formula CnH2n.

Cyclohexene

A cyclic hydrocarbon with the formula C6H10, characterized by the presence of a double bond in the ring structure.

Concentrated KMnO4

Potassium permanganate in a high concentration, a strong oxidizing agent used in qualitative organic analyses and in various other chemical processes.

1-Hexanol

An organic alcohol compound with a six-carbon chain terminating in a hydroxyl group, used primarily as a flavoring agent or perfume ingredient.