The Expectations Theory Posits That

question 16

Multiple Choice

The expectations theory posits that

• A)the long-term rate is the geometric average of the current short-term rate and short-term rates expected to prevail over the term to maturity of the long-term security.
• B)the short-term rate is the geometric average of the current long-term rate and long-term rates expected to prevail over the term to maturity of the short-term security.
• C)the long-term rate is the geometric average of the current long-term rate and short-term rates expected to prevail over the term to maturity of the long-term security.
• D)the long-term rate is the geometric average of the current short-term rate and the rate of inflation expected to prevail over the term to maturity of the long-term security.

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