According to the Unbiased Expectations Theory

question 40

Multiple Choice

According to the unbiased expectations theory,

• A)the term structure will most often be upward sloping.
• B)liquidity premiums are negative and time varying.
• C)the long-term spot rate is an average of the current and expected future short-term interest rates.
• D)markets are segmented and buyers stay in their own segment.
• E)forward rates are less than the expected future spot rates.

---

Definitions:

Auto-Insurance

A contract between a vehicle owner and an insurance company, where the insurer covers losses related to car accidents or theft.

Monitored Lock

A lock system that is tracked or observed to ensure its integrity, often used in security applications.

Moral Hazard

The situation where one party is more likely to take risks because another party bears the cost of those risks.

Hidden Actions

Situations in a principal-agent relationship where the agent undertakes actions that the principal cannot observe directly.