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

question 85

Multiple Choice

Which theory of term structure states that long-term rates are equal to the geometric average of current and expected short-term rates plus a risk premium that increases with the maturity of the security?

• A)The unbiased expectations theory.
• B)The liquidity premium theory.
• C)The loanable funds theory.
• D)The market segmentation theory.
• E)None of the above.

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Definitions:

Calculate

To determine the value of something by mathematical or logical methods.

Calculate

To determine through mathematical processes or to compute.

F

A ratio used in ANOVA tests, comparing the variance between groups to the variance within groups.

Y-intercept

In a graph, it is the point at which the curve intersects the vertical axis, indicating the value when independent variables are absent.