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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