The Unbiased Expectations Theory of the Term Structure of Interest

question 67

Multiple Choice

The unbiased expectations theory of the term structure of interest rates

• A)assumes that long-term interest rates are an arithmetic average of short-term rates.
• B)assumes that the yield curve reflects the market's current expectations of future short-term interest rates.
• C)recognizes that forward rates are perfect predictors of future interest rates.
• D)assumes that risk premiums increase uniformly with maturity.

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Definitions:

Absolute Advantage

The capacity of a nation, person, corporation, or area to generate a product or offer a service at a per-unit cost that is cheaper than the per-unit cost at which any other party produces the same product or service.

Frederic Bastiat

A French economist, writer, and prominent member of the French Liberal School in the 19th century, known for his advocacy of free trade and the critique of socialism.

Absolute Advantage

The ability of a country, company, or individual to produce a good or provide a service more efficiently than competitors, using the same amount of resources.

Nigerian Worker

An individual from Nigeria who is engaged in employment or labor activities, contributing to the country's economy.