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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