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Econ 121 Test 3

Econ 121 Test 3 - the theory that a long-term interest rate...

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Liquidity: difference in yields On-the-run security: the U.S. treasury security (for a given time to maturity) that was issued most recently in the primary market ( very liquid market) Off-the-run security: a U.S. treasury security that is not the most recently issued Basis point: one-hundredth of a percentage point Expectations theory of the term structure of interest rates
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Unformatted text preview: : the theory that a long-term interest rate is equal to the average of current and expected future short-term interest rates Term premium: the difference between the interest rate on a longer-term bond and the average rate on shorter-term bonds, which arises from interest-rate risk Long-term bonds are riskier than short-term bonds...
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