The Expectations Theory Ignores Several Factors Including the Idea That

question 109

Multiple Choice

The expectations theory ignores several factors including the idea that:

• A) investors may have a preference for investing in longer-term bonds due to the added risk they offer over shorter-term bonds.
• B) investors may have a preference for investing in shorter-term bonds due to the added risk offered by longer-term bonds.
• C) some investors such as pension funds have a desire to match the maturity of their liabilities.
• D) All of the above
• E) both (b)and (c)

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Definitions:

Standard Deviation

The measure of the dispersion of a set of values relative to its mean, indicating how spread out the values are.

Standard Normal Curve

A bell-shaped curve that is symmetric about the mean, representing the distribution of a standard normal variable with a mean of zero and a variance of one.

Mean

The arithmetic average of a set of numbers, calculated by dividing the sum of all values by the count of the values.

Frequency Curve

A graphical representation depicting the distribution of different frequencies of a set of data.