Of the Four Theories That Explain How Interest Rates on Bonds

question 72

Multiple Choice

Of the four theories that explain how interest rates on bonds with different terms to maturity are related,the one that views long-term interest rates as equaling the average of future short-term rates expected to occur over the life of the bond is the

• A) pure expectations theory.
• B) preferred habitat theory.
• C) liquidity premium theory.
• D) segmented markets theory.

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Definitions:

1960s

A decade marked by significant social, political, and cultural change worldwide, including the civil rights movement, the Vietnam War, and the rise of counterculture.

Radical Politics

Political philosophies or movements that advocate for fundamental and transformative changes to society, often opposed to the established social order and mainstream ideologies.

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Mainstream Society

The dominant or prevailing cultural norms, beliefs, values, and practices in a given society, often contrasted with those of subcultures or minority groups.