According to the Expectations Theory of the Term Structure

question 3

Multiple Choice

According to the expectations theory of the term structure

• A)the interest rate on long-term bonds will exceed the average of short-term interest rates that people expect to occur over the life of the long-term bonds,because of their preference for short-term securities.
• B)interest rates on bonds of different maturities move together over time.
• C)buyers of bonds prefer short-term to long-term bonds.
• D)buyers require an additional incentive to hold long-term bonds.

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Definitions:

Capacity

The maximum level of output that a company can sustain to produce in a given period under normal conditions.

Net Credit Period

The amount of time allowed by a seller to the buyer to pay for the goods or services purchased on credit.

Operating Cycle

A measure of the time it takes for a business to purchase inventory, sell products, and convert sales into cash.