Which one of the following theories states that the term structure of interest rates reveals the financial market's projections of future interest rates?
A)market rate theory
B)market yield theory
C)Fisher hypothesis
D)expectations theory
E)rational rate hypothesis

Question

Quizplus · Accepted Answer

The expectations theory states that the term structure of interest rates reflects the market's expectations of future interest rates. It assumes that investors are rational and forward-looking, and that the shape of the yield curve is determined by the market's expectations of future short-term interest rates.

Which One of the Following Theories States That the Term