According to the expectations theory of the term structure,
A) the interest rate on long-term bonds will exceed the average of expected future short-term interest rates.
B) interest rates on bonds of different maturities move together over time.
C) buyers of bonds prefer short-term to long-term bonds.
D) all of the above.
E) only A and B of the above.

Question

Quizplus · Accepted Answer

The expectations theory of the term structure suggests that interest rates on bonds of different maturities move together over time because long-term rates are an average of current and expected future short-term rates.

According to the Expectations Theory of the Term Structure