The ________ of the Term Structure of Interest Rates States

question 99

Multiple Choice

The ________ of the term structure of interest rates states that the interest rate on a long-term bond will equal the average of short-term interest rates that individuals expect to occur over the life of the long-term bond,and investors have no preference for short-term bonds relative to long-term bonds.

• A)segmented markets theory
• B)expectations theory
• C)liquidity premium theory
• D)separable markets theory

---

Definitions:

Kinetic Energy

The energy that an object possesses due to its motion, dependent on the object's mass and velocity.

Ions

Atoms or molecules with a net electric charge due to the loss or gain of one or more electrons.

Molecules

The smallest unit of a chemical compound that can retain the chemical properties of the compound, consisting of one or more atoms bonded together.

First Law of Thermodynamics

This principle states that energy cannot be created or destroyed, only transformed from one form to another, implying that the total energy in an isolated system remains constant.