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The Expectations Hypothesis States That Investors

Question 25

Multiple Choice

The expectations hypothesis states that investors


A) normally expect the yield curve to be downsloping.
B) require higher long- term interest rates today if they expect higher inflation rates in the future.
C) require the real rate of return to rise in direct proportion to the length of time to maturity.
D) expect higher long- term interest rates because of the lack of liquidity for long- term bonds.

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