Which Theory of Term Structure States That Long-Term Rates Are

question 70

Multiple Choice

Which theory of term structure states that long-term rates are equal to the geometric average of current and expected short-term rates plus a risk premium that increases with the maturity of the security?

• A)The unbiased expectations theory.
• B)The liquidity premium theory.
• C)The loanable funds theory.
• D)The market segmentation theory.
• E)None of these.

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A series of steps taken by an individual or organization to determine the best action to achieve a particular goal.

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Financial markets where prices fully reflect all available information.

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The process of analyzing the additional or incremental costs or benefits arising from a choice or decision.

Industrial Revolution

The period in England during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities.