According to the expectations theory of the term structure,the interest rate on a long-term bond will equal the ________ of the short-term interest rates that people expect to occur over the life of the long-term bond.
A)average
B)sum
C)difference
D)multiple

Question

Quizplus · Accepted Answer

According to the expectations theory of the term structure, the interest rate on a long-term bond will equal the average of the short-term interest rates that people expect to occur over the life of the long-term bond. This means that the long-term interest rate is an average of expected short-term rates.

According to the Expectations Theory of the Term Structure,the Interest