According to the Expectations Theory of Term Structure,if Investors Believed

question 102

Multiple Choice

According to the expectations theory of term structure,if investors believed that the average of the expected future short-term yields was greater than the long-term yield for a holding period,they would act so as to:

• A) drive down the price of the short-term security and drive up the price of the long-term security.
• B) drive up the price of the short-term security and drive down the price of the long-term security.
• C) drive up the prices of both the short-term and long-term securities.
• D) drive down the prices of both the short-term and long-term securities.

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Definitions:

Highly Inelastic

Describes a situation where the quantity demanded or supplied changes very little in response to changes in price.

Antiques

Objects of considerable age valued for their aesthetic or historical significance.

Percentage Change

A mathematical calculation that indicates the degree of change over time, expressed as a percentage representing increase or decrease.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price.