In Relation to the Term Structure of Interest Rates,the Expectations

question 86

Multiple Choice

In relation to the term structure of interest rates,the expectations theory assumes:

• A) there are a large number of financial investors who hold heterogeneous expectations about future interest rates.
• B) investors need to take into account costly transactions as they change their expectations.
• C) long-term rates paid bonds will be equal to the average of short-term interest rates expected to prevail over the longer term period.
• D) there is some impediment to market rates moving to equilibrium.

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Definitions:

Inequity

A state of unfairness or injustice where there is an imbalance or disproportionality in the distribution of resources or opportunities among individuals or groups.

Restoring Equity

The process of ensuring fairness and balance in the distribution of resources and opportunities.

Adams's Theory

Relates to the equity theory of motivation, suggesting that employees are motivated to maintain equity between inputs and outcomes in their job and workplace.

Expectancy Theory

A theory of motivation suggesting that individuals are motivated to act based on the expected outcome of their actions and the value they place on those outcomes.