Which Fact About the Term Structure Is the Expectations Theory

question 34

Multiple Choice

Which fact about the term structure is the Expectations Theory unable to explain?

• A) Why interest rates on bonds with different terms to maturity tend to move together over time
• B) Why yields on short-term bonds are more volatile than yields on long-term bonds
• C) Why longer-term yields tend to be higher than shorter-term yields
• D) Why yields on short-term bonds are more volatile than yields on long-term bonds and why longer-term yields tend to be higher than shorter-term yields

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Definitions:

Inventory Collection

The process of organizing and managing products or stock that a company holds for sale to customers.

Inventory Payment

The financial transactions related to the purchasing of inventory, either on a cash or credit basis.

Cash Conversion Cycle

A measurement that gauges the duration required for a business to transform its investments in stock and other assets into cash flows from customer purchases.

Receivables Collection

The process of a business collecting payments owed by its customers for goods or services provided.