Should long-term interest rates equal an average of current and expected future short-term interest rates, this would be consistent with
A) The term (liquidity) premium hypothesis
B) The efficient markets hypothesis
C) The expectations hypothesis
D) The market-segmentation hypothesis

Question

Quizplus · Accepted Answer

The expectations hypothesis suggests that long-term interest rates are determined by current and expected future short-term interest rates, without adjusting for risk premiums.

Should Long-Term Interest Rates Equal an Average of Current and Expected