Which Theory of Term Structure Posits That Long-Term Rates Are

question 60

Multiple Choice

Which theory of term structure posits that long-term rates are a geometric average of current and expected short-term interest rates?

• A)The unbiased expectations theory.
• B)The liquidity premium theory.
• C)The loanable funds theory.
• D)The market segmentation theory.

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Definitions:

Executory Costs

Executory costs are expenses associated with fulfilling the terms of a contract, typically not included in the initial acquisition cost of an asset.

Guaranteed Residual Value

The minimum future value of an asset as guaranteed by a third party or agreement upon the asset's lease end.

Initial Direct Costs

Initial Direct Costs are expenses directly associated with negotiating and arranging a lease that are not included in the net investment in the lease.

Sale-leaseback

A transaction where an asset is sold and immediately leased back from the new owner, allowing the seller to continue using the asset while freeing up capital.