Which One of the Following Best Describes the Fisher Hypothesis

question 24

Multiple Choice

Which one of the following best describes the Fisher hypothesis?

• A)long-term interest rates are based on current inflation rates
• B)nominal interest rates are inversely related to real rates
• C)interest rates tend to be higher than inflation rates
• D)nominal interest rates tend to be relatively constant over time
• E)future interest rates must be higher than current interest rates

---

Definitions:

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, often indicating the bond's price volatility.

Red Herring

In financial contexts, a red herring is a preliminary prospectus filed by a company with the SEC, usually in connection with an initial public offering, containing important information but lacking details on price and offering size.

Prospectus

A formal document that companies and mutual funds use to describe the investment offering to potential investors, providing details such as objectives, risks, and financials.

SEC

The U.S. Securities and Exchange Commission, a federal agency tasked with protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation.