Assume the Expectation Hypothesis Regarding the Term Structure of Interest

question 41

Multiple Choice

Assume the Expectation Hypothesis regarding the term structure of interest rates is correct. Then, if the current one-year interest rate is 4% and the two-year interest rate is 6%, then investors are expecting:

• A) The future one-year rate to be 4%
• B) The future one-year rate to be 8%
• C) The future one-year rate to be 6%
• D) The future one-year rate to be 5%

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Definitions:

Situational Causes

Factors or circumstances outside the individual that are attributed to affecting behavior.

Individualistic Culture

A culture that emphasizes personal independence and the value of individual self-expression over collective goals.

Collectivistic Culture

A societal framework where individuals prioritize the needs and goals of the group over their own personal needs and desires.

Personal Goals

Individual objectives and ambitions that a person aims to achieve, which can be short-term or long-term.