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:

Depressed

A state characterized by persistent feelings of sadness, hopelessness, and a lack of interest or pleasure in activities.

Probability

A measure of the likelihood of occurrence of a particular event or outcome, expressed as a number between 0 and 1.

Smiling

The act of expressing happiness, pleasure, or friendliness through a facial expression that typically raises the corners of the mouth.

Making Friends

The process of establishing mutually beneficial relationships with others.