The Expectations Theory of the Term Structure of Interest Rates

question 43

Multiple Choice

The expectations theory of the term structure of interest rates states that

• A)forward rates are determined by investors' expectations of future interest rates.
• B)forward rates exceed the expected future interest rates.
• C)yields on long- and short-maturity bonds are determined by the supply and demand for the securities.
• D)all of the above.
• E)none of the above.

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Definitions:

Discrepancies

Differences or inconsistencies found when comparing two sets of data or reports, often requiring further investigation.

External Auditors

Independent auditors who examine the financial statements of an entity to ensure accuracy and compliance with applicable standards.

Internal Controls

Procedures and policies implemented by a company to ensure the integrity of financial and accounting information, promote accountability and prevent fraud.

Independent

Free from external control or influence; not connected or dependent on something else.