Based on Expectations Theory, the Term Structure of Interest Rates

question 98

Multiple Choice

Based on expectations theory, the term structure of interest rates will be ________ anytime investors believe that interest rates will be higher in the future than they are today.

• A)volatile
• B)flat
• C)downward sloping
• D)upward sloping
• E)vertical

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Definitions:

Dividend Yield

The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Par Value

The face value of a bond or the stock value stated in the corporate charter.

Common Stock

A type of equity ownership in a corporation, representing a claim on a portion of the company's profits and assets.

Market Value

The current price at which an asset or service can be bought or sold, determined by the supply and demand dynamics in the open market.