According to the expectations theory,the interest rate on a long-term bond is the average of the short-term interest rates expected over the life of the long-term bond.

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The expectations theory assumes that investors hold long-term bonds based on their expected future value rather than their maturity date. Therefore, the interest rate on a long-term bond is determined by the expected average of short-term interest rates over the life of the bond. This theory is based on the idea that investors are indifferent between holding a series of short-term bonds or a single long-term bond, as long as their expected returns are the same.

According to the Expectations Theory,the Interest Rate on a Long-Term