If the expectations theory of the term structure of interest rates is correct, and if the other term structure theories are invalid, and we observe a downward sloping yield curve, which of the following is a true statement? and why?
Homework Answers
Option ,Investors expect short-term rates to decrease in the future.
Reason: When the yield curve is sloping downward the investors expect recession in the economy and have very less confidence in the market.
Add Answer to:
If the expectations theory of the term structure of interest
rates is correct, and if the...
Which of the following is correct? A. The maturity premiums embedded in the interest rates on...
Which of the following is correct? A. The maturity premiums embedded in the interest rates on us treasury securities are due primarily to the fact that the probability of default is lower on long-term bonds than on short-term goals. B. If the maturity risk premium were zero and the rate of inflation were expected to increase in the future, then the yield curve for us treasurt securities would, other things held constant, have an upward slope. C. According to the...
According to the liquidity premium theory of interest rates, long-term spot rates are totally unrelated to...
According to the liquidity premium theory of interest rates, long-term spot rates are totally unrelated to expectations of future short-term rates. the term structure must always be upward sloping. investors prefer certain maturities and will not normally switch out of those maturities. long-term spot rates are higher than the average of current and expected future short-term rates. investors are indifferent between different maturities if the long-term spot rates are equal to the average of current and expected future short-term rates.
8. The expectations theory suggests that: the yield curve should usually be downwardr sloping the slope...
8. The expectations theory suggests that: the yield curve should usually be downwardr sloping the slope of the yield curve depends on the expected future path of short-term rates. the slope of the yield curve reflects the risk premium incorporated into the yields on long-term bonds. the yield curve should usually be upward-sloping. A. B. D.
Which of the following statements about the term structure of interest rates is incorrect? A. According...
Which of the following statements about the term structure of interest rates is incorrect? A. According to the Liquidity Preference Theory, long-term interest rates are usually higher than short-term interest rates. B. The Market Segmentation Theory posits that bonds of different maturities are traded by different investors and their prices/yields are determined separately. C. The Pure Expectations Theory asserts that the yield curve is explained solely by investors' interest rate expectations. D. According to the Pure Expectations Theory, an upward...
Which of the following is correct? A. The maturity premiums embedded in the interest rates on...
Which of the following is correct? A. The maturity premiums embedded in the interest rates on us treasury securities are due primarily to the fact that the probability default is lower on long term bonds than on short term goals. B. Reinvestment rate is lower, other things held constant, on long term in short term bonds. C. According to the market segmentation theory of the term structure of interest rates, we should normally expect the yield curve to slowe downward....
The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used...
The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates. Based on the pure expectations theory, is the following statement true or false? The pure expectations theory assumes that a one-year bond purchased today will have the same return as a one-year bond purchased five years from now. False True The yield on a one-year Treasury security is 5.3800%, and the two-year Treasury security has a 8.0700% yield....
The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used...
The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates. Based on the pure expectations theory, is the following statement true or false? A certificate of deposit (CD) for two years will have the same yield as a CD for one year followed by an investment in another one-year CD after one year. True False The yield on a one-year Treasury security is 4.4600%, and the two-year Treasury...
Pure expectations theory Problem: The pure expectations theory, or the expectations hypothesis, asserts that long-term...
The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates.Based on the pure expectations theory, is the following statement true or false?The pure expectations theory assumes that investors do not consider long-term bonds to be riskier than short-term bonds.TrueFalseThe yield on a one-year Treasury security is 4.6900 %, and the two-year Treasury security has a 6.3315 %yield. Assuming that the pure expectations theory is correct, what is the...
- - higher interes in the long-term where My Pe Theory Market Netto They The Curve...
- - higher interes in the long-term where My Pe Theory Market Netto They The Curve Theory None of the above fequitymarkets are strong form Micient Investors should chose quity portfolios randomly Investors should put money only in professionally managed equity portfolios Investors should not invest in equity securities Investors should invest in stocks with high P raties Investors should form portfolios that are well diversified and appropriate for their own levels of risk tolerance TO To apply the Dividend...
The following are statements consistent with the Segmented Markets Theory of the term structure on interest...
The following are statements consistent with the Segmented Markets Theory of the term structure on interest rates, EXCEPT: Question 9 options: Bonds of different maturity are close substitutes, implying that their interest rates move together over time. Due to the liquidity premium effect, the yield curve will likely be positively sloped. Investors' strong preferences for short-term relative to long-term bonds explains why Yield curves typically slope upwards. The interest rates among assets of different maturity are unrelated.
8. The expectations theory suggests that: the yield curve should usually be downwardr sloping the slope of the yield curve depends on the expected future path of short-term rates. the slope of the yield curve reflects the risk premium incorporated into the yields on long-term bonds. the yield curve should usually be upward-sloping. A. B. D.
The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates. Based on the pure expectations theory, is the following statement true or false? The pure expectations theory assumes that a one-year bond purchased today will have the same return as a one-year bond purchased five years from now. False True The yield on a one-year Treasury security is 5.3800%, and the two-year Treasury security has a 8.0700% yield....
The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates. Based on the pure expectations theory, is the following statement true or false? A certificate of deposit (CD) for two years will have the same yield as a CD for one year followed by an investment in another one-year CD after one year. True False The yield on a one-year Treasury security is 4.4600%, and the two-year Treasury...
- - higher interes in the long-term where My Pe Theory Market Netto They The Curve Theory None of the above fequitymarkets are strong form Micient Investors should chose quity portfolios randomly Investors should put money only in professionally managed equity portfolios Investors should not invest in equity securities Investors should invest in stocks with high P raties Investors should form portfolios that are well diversified and appropriate for their own levels of risk tolerance TO To apply the Dividend...
Most questions answered within 3 hours.
-
What are John’s potential claims if he is terminated
this week?
John is a 54-year-old man...
asked 4 minutes ago -
A (8.5) cm tall object is placed at a distance of (14.2) cm from
a convex...
asked 13 minutes ago -
(2) For the following questions, consider a data set that
exhibits a normal distribution. Report the...
asked 14 minutes ago -
What exactly is an information system? How does it work" What
are its people organization,
...
asked 15 minutes ago -
The Food Marketing Institute shows that 17% of households spend
more than $100 per week on...
asked 25 minutes ago -
Go to NCBI BLAST search web page
1st search: GEKDLRRAKDINQEVYNF
2nd search: PTSQRLQLLEPFDK
3rd search: GEKDLRRAKDINQEVYNF...
asked 28 minutes ago -
Explain how each of the following three conditions could be a
red flag for a register...
asked 33 minutes ago -
In a two-way factorial ANOVA, the final F-ratio for
factor AxB is determined by dividing _____...
asked 1 hour ago -
Show your solutions for answer.
4. An aqueous solution contains 9.21 g of
K4Fe(CN)6 in a...
asked 33 minutes ago -
The random variable X has a uniform distribution with values
between 16 and 18. What is...
asked 43 minutes ago -
Evaluate each of the following transactions in terms of their
effect on assets, liabilities, and equity....
asked 42 minutes ago -
The amounts of nicotine in a certain brand of cigarette are
normally distributed with a mean...
asked 1 hour ago