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:

Epidemiological Study

A study that measures the incidence and prevalence of a disorder in a given population.

Analogue Experiments

Experiments that simulate real-life situations in a controlled environment to study behaviors or phenomena.

Unnecessary Distress

Stress or suffering that is not essential or a natural consequence of a situation, often implying that it could be avoided or mitigated.

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An unpleasant sensory and emotional experience associated with actual or potential tissue damage, or described in terms of such damage, often signaling the body to react to prevent further tissue damage.