If research showed that anticipation about future interest rates was the only important factor for all investors in choosing short-term or long-term securities, this would support the argumentmade by the
A) liquidity premium theory.
B) expectations theory.
C) segmented markets theory.
D) A and B

Question

Quizplus · Accepted Answer

The expectations theory suggests that long-term interest rates are determined by the expected future short-term rates. If research showed that anticipation about future interest rates was the only important factor for all investors in choosing short-term or long-term securities, then it would support the expectations theory. It would suggest that investors make their decisions based solely on their expectations about future interest rates, rather than other factors like liquidity or market segmentation, which are emphasized in the liquidity premium theory and segmented markets theory, respectively. Therefore, the correct answer is B.

If Research Showed That Anticipation About Future Interest Rates Was