According to the Expectations Theory,which of the Following Is False

question 29

Multiple Choice

According to the expectations theory,which of the following is false?

• A) It assumes that instruments with different maturities are perfect substitutes.
• B) It implies that a long-term bond rate equals the average of short-term rates covering the same investment period.
• C) It implies that the yield curve will usually slope upward.
• D) It implies that the shape of the yield curve depends on the expected pattern of future short-term rates.

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Definitions:

Equation

A mathematical statement that asserts the equality of two expressions.

Unit Change

A term describing the effect of a one-unit increase in the independent variable on the dependent variable in the context of statistical models, particularly regression analysis.

Regression Assumptions

Conditions that must be met for the regression analysis results to be valid, including linearity, independence, homoscedasticity, and normality of residuals.

F Distribution

A probability distribution that arises in the testing of whether two population variances are equal and in the analysis of variance (ANOVA) for comparing means among more than two groups.