The Expectations Theory of the Term Structure of Interest Implies

question 47

Multiple Choice

The expectations theory of the term structure of interest implies that:

• A)interest received on securities is in accordance with term to maturity.
• B)bond investors can expect to achieve the same return over any future period,regardless of the security in which they invest.
• C)there is a premium due to uncertainty about the future level of interest rates.
• D)there is a risk that borrowers may default on the payment of the principal.

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Definitions:

Efferent Nerves

Nerves that carry neural impulses away from the central nervous system to effectors such as muscles or glands.

Afferent Nerves

Afferent nerves are sensory nerves that carry information from sensory organs and structures of the body to the brain and spinal cord.

Olfactory Nerves

Cranial nerves responsible for conveying sensory information regarding smells from the nose to the brain, playing a crucial role in the sense of smell.

Auditory Nerves

The cranial nerves that transmit sound information from the inner ear to the brain for auditory processing.