Yield curves can be classified as ().
A. upward-sloping
B. downward-sloping
C. flat
D. all of the above
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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. segmented markets theory
C. liquidity premium theory
D. preferred habitat theory
According to the efficient market hypothesis, the current price of a financial security ().
A. is the discounted net present value of future interest payments
B. is determined by the highest successful bidder
C. fully reflects all available relevant information
D. is a result of none of the above
How expectations are formed is important because expectations influence ().
A. the demand for assets
B. bond prices
C. the risk structure of interest rates
D. the term structure of interest rates
E. all of the above
When the federal government's budget deficit decreases, the () curve for bonds shifts to the ().
A. demand; right
B. demand; left
C. supply; left
D. supply; right