Suppose the nominal yield during the next two years was expected to remain at 10%, but the yield on a one-year security was 10% and on a two-year security was 12%. Investors would:
a. Borrow for one year, invest for two years, and at the end of the first year, roll over the loan.
b. Probably do nothing, because markets are efficient, which means there is no way to arbitrage them.
c. Borrow for two years, invest for one year, and then roll over the investment at the end of the first year.
d. Borrow for two years and invest for two years, but at the end of the first year, re-borrow and re-invest at the market rate.
e. Borrow for one year and invest for one year, but at the end of the first year, re-borrow and re-invest the borrowed funds at the expected rate.
.A
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Friedman and Phelps suggested that there should not be a stable relationship between inflation and unemployment, but there should be a stable relationship between
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Which of the following attempts to go beyond the basic assumptions of the traditional economic model and augment it with findings from psychology to gain a greater understanding of complex consumer behavior?
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