Identify three prominent theories that attempt to explain the term structure of interest rates
What will be an ideal response?
Three possible theories may explain the shape of the term structure of interest rates at any point in time:
The Unbiased Expectations Theory: The theory says that the term structure is determined by an investor's expectations
about future interest rates.
The Liquidity Preference Theory: According to the theory, investors require maturity-risk premiums to compensate
them for buying securities that expose them to the risks of fluctuating interest rates.
The Market Segmentation Theory: The theory implies that the rate of interest for a particular maturity is determined
solely by demand and supply for a given maturity and that it is independent of the demand and supply for securities
having different maturities.
You might also like to view...
Don't use contractions with _______________
a. action verbs b. possessive pronouns c. complex nouns d. nominalizations
_______ captures the perceived continuity or growth in the relationship between two firms
It entails a desire to develop a stable relationship, a willingness to make short-term sacrifices to maintain the relationship, and a confidence in the stability of the relationship. a. Bridging b. Trust c. Commitment d. Guarantee
The American Footwear and Apparel Group exerts pressure on its members to comply with the ethical standards of the industry and provides information and benefits for textile companies. This company is an example of a(n)
A. regulatory agency. B. government agency. C. trade association. D. industry organization. E. membership club.
Changing consumers' perceptions of a brand in relation to competing brands is known as:
A. positioning B. repositioning C. reintermediation D. demarketing E. reengineering