Unformatted text preview: e; left C) rise; right D) fall; left 14) According to the expectations theory of the term structure, the interest rate on a long-term bond 14) ______ will equal the ________ of the short-term interest rates that people expect to occur over the life of the long-term bond. A) average B) multiple C) difference D) sum 15) If the expected path of 1-year interest rates over the next four years is 5 percent, 4 percent, 2 15) ______ percent, and 1 percent, then the expectations theory predicts that todayʹs interest rate on the four-year bond is ________. A) 4 percent B) 3 percent C) 1 percent D) 2 percent 16) The mound-shaped yield curve in the figure above indicates that short-term interest rates are expected to ________. A) fall moderately in the near-term and rise later on B) fall sharply in the near-term and rise later on C) rise in the near-term and fall later on D) remain unchanged in the near-term and fall later on 17) In the one-period valuation model, the current stock price increases if ________. A) the required return increases B)...
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This document was uploaded on 03/20/2014 for the course ECO ECO349 at University of Toronto.
- Winter '14