Which of the Below Statements About the Pure Expectations Theory

question 24

Multiple Choice

Which of the below statements about the pure expectations theory is FALSE.

• A) According to the pure expectations theory, the forward rates exclusively represent the expected future rates.
• B) The entire term structure at a given time reflects the market's current expectations of the family of future short-term rates.
• C) A rising term structure must indicate that the market expects short-term rates to rise throughout the relevant future.
• D) A flat term structure reflects an expectation that future short-term rates will always be constant, while a falling term structure must reflect an expectation that future short rates will decline rapidly.

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Definitions:

Strategies

Planned methods or actions for achieving specific goals.

Encounter

Encounter typically refers to an unexpected or casual meeting between individuals or groups, often leading to a confrontation or negotiation.

Sensitive

Being easily affected by external forces or stimuli; often refers to issues or subjects requiring careful handling.

Deft Touch

A deft touch refers to the skillful and subtle handling of a situation, often implying a gentle or nuanced approach.