The Theory of the Term Structure of Interest Rates, Which

question 7

Multiple Choice

The theory of the term structure of interest rates, which states that investors and borrowers choose securities with maturities that satisfy their forecasted cash needs, is the

• A)pure expectations theory.
• B)liquidity premium theory.
• C)segmented markets theory.
• D)liquidity habitat theory.

---

Definitions:

Simple Linear Regression Equation

The simple linear regression equation describes the relationship between two variables by fitting a straight line through the data points that minimizes the sum of the squared differences between observed and predicted values.

Point Estimate

A single value that serves as an estimate of a population parameter.

Regression Analysis

A statistical method for estimating the relationships among variables, including a dependent variable and one or more independent variables.

Least Squares Line

A straight line that minimizes the sum of the squared differences between observed values and the values predicted by the line.