A "Normal" Term Structure of Interest Rates Would Depict

question 129

Multiple Choice

A "normal" term structure of interest rates would depict

• A) short-term rates are higher than long-term rates.
• B) long-term rates are higher than short-term rates.
• C) no general relationship between short- and long-term rates.
• D) intermediate rates (one to five years) are lower than both the short-term and long-term rates.

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Definitions:

Dampening

The process of reducing the amplitude or intensity of fluctuations or oscillations in a system or signal.

Amplification

In context, refers to the increase in signal strength or the magnification of the effects or significance of something.

Smoothing

A technique used to remove variability or fluctuations in data or a process, often to reveal underlying trends.

Bullwhip Effect

A phenomenon in supply chain management where small variations in demand at the retail level cause increasingly larger variations in demand at the wholesale, distributor, and manufacturer levels.