Using the Pure Expectations Approach to the Determination of Interest

question 39

Multiple Choice

Using the pure expectations approach to the determination of interest rates,what is the shape of the yield curve indicated in the following data?
(₀i₁) 9.47% per annum
(₁i₁) 8.45% per annum
(₀i₂) 8.96% per annum

• A) Humped yield curve
• B) Inverse yield curve
• C) Normal yield curve
• D) Variable yield curve

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Definitions:

American System

An economic plan that played a significant role in the policy-making of the early 19th century in the United States, advocating for high tariffs, a national bank, and federal subsidies for roads, canals, and other 'internal improvements' to develop profitable markets for agriculture.

James Madison

The fourth President of the United States (1809-1817), known as the "Father of the Constitution" for his pivotal role in drafting and promoting the U.S. Constitution.

Agenda

A list or plan of items to be discussed or acted upon, typically used in meetings, conferences, or projects.

Sacagawea

A Lemhi Shoshone woman who assisted the Lewis and Clark Expedition in achieving their chartered mission objectives by exploring the Louisiana Territory.