Briefly explain the expectations theory.
What will be an ideal response?
The expectations theory states that in well-functioning bond markets a series of investments in short maturity bonds must offer the same expected return as an equivalent investment in a single long-maturity bond.
You might also like to view...
A partner invests into a partnership a building with a $50,000 carrying value and $80,000 fair market value. The related mortgage payable of $25,000 is not assumed by the partnership. The entry to record the investment in partnership is:
A) Building 50,000 Capital 50,000 B) Building 80,000 Capital 80,000 C) Capital 80,000 Mortgage Payable 25,000Building 55,000 D) Building 80,000 Mortgage Payable 25,000Capital 55,000
Marla, a 55-year-old woman, wants to stay in touch with her son, who is away at college. She also hopes to connect with some of her high school friends. Which of the following is Marla most likely to use for this purpose?
a. SoundCloud b. YouTube c. Facebook d. Flickr
If a bond's stated interest rate is lower than the market rate, which of the following is true?
A) The bond will be issued at a premium. B) The bond will be issued at par. C) The bond will be issued at a discount. D) The bond will be issued for an amount higher than the maturity value.
The net profit margin:
A. measures how much profit from each dollar of revenue. B. measures the percentage of assets financed by debt. C. means improved performance if it decreases. D. means weaker performance if it increases.