The ________ is cited by the author as a reason for using just one rate,a long-term yield,as the average cost of debt financing for a firm that has multiple issues of debt with varying maturities.

Question

Quizplus · Accepted Answer

The unbiased expectations theory states that the long-term rate is an unbiased predictor of future short-term rates. Therefore, using just one rate, a long-term yield, as the average cost of debt financing for a firm that has multiple issues of debt with varying maturities is reasonable according to this theory. The other options (A, B, C) are not relevant to the author's argument.

The ________ Is Cited by the Author as a Reason