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

question 61

Multiple Choice

Which theory of term structure posits that long-term rates are a geometric average of current and expected short-term interest rates?

• 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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Definitions:

Tax Bracket

A tax bracket is a range of incomes taxed at a particular rate within a tax system, influencing how much individuals or entities owe to the government.

Marginal Tax Rate

The rate of additional federal income tax to be paid on an extra dollar of income.

Average Tax Rate

The proportion of total income that is paid as taxes, calculated by dividing the total taxes paid by the total taxable income.

Federal Personal Income Tax

A tax levied by the federal government on the income of individuals, adjusted for various deductions and exemptions.