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:

Revenue Variance

The difference between actual revenue earned and the expected revenue, often analyzed for budgeting and performance assessment purposes.

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Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, allowing for better budgetary control and analysis.

Actual Results

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