Which Fact About the Term Structure Is the Expectations Theory

question 111

Multiple Choice

Which fact about the term structure is the Expectations Theory unable to explain?

• A)Why interest rates on bonds with different terms to maturity tend to move together over time.
• B)Why yields on short-term bonds are more volatile than yields on long-term bonds.
• C)Why longer-term yields tend to be higher than shorter-term yields.
• D)Why long-term bond yields are influenced by expected future short-term bond yields.

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Definitions:

Subatomic Particles

The smaller particles that make up atoms, including protons, neutrons, and electrons.

Nucleus

A membrane-bound organelle found in eukaryotic cells containing the genetic material, playing a key role in growth, metabolism, and reproduction.

Electrons

Subatomic particles with a negative charge, found orbiting the nucleus of atoms and involved in chemical reactions and electrical conductivity.

Atomic Number

Number of protons in each type of atom.