Posted by **Jason** on Friday, July 25, 2008 at 11:10am.

Some analysts believe that the term structure of interest reates is determined by the behavior of various types of financial institutions. this theory is called the:

A. expectations hypothesis

B. segmentation theory

C. liquidity premium theory

D. theory of industry supply and demand for bonds

The structure of interest rates is also know as the yield curve, so I like the expectations theory (A)

- finance (structure of interest rates) -
**Damon**, Friday, July 25, 2008 at 11:18am
In most environments the interest rate on bonds is high for long term bonds and lower for short term bonds. This is because in theory people are more nervous about lending money for longer periods of time because "anything might happen" in thirty years but if I loan the company the money for only one year I am more likely to get it back. Therefore I want higher interest for the long term bond. That sort of sounds like "expectations" to me, but I have no experience with this terminology.

## Answer This Question

## Related Questions

- Financial Management - 1. Total asset turnover indicates the firm's a)liquidity...
- finance 3 questions - Some analysts believe that the term structure of interest ...
- finance part 2 - 11. Whit a Subchapter S corporation A. corporate income is ...
- FINANCE - 7. Forecasting interest rates Assume the current interest rate on a ...
- FINANCE - 5. Forecasting Interest Rates Assume the current interest rate on a ...
- FINANCE - 4. Liquidity Premium Hypothesis Suppose we observe the following rates...
- Need help by tonite Finance - 4. Liquidity Premium Hypothesis Suppose we observe...
- Math - Term-structure of interest rates and Arbitrage The current term-structure...
- finance - A "normal" term structure of interest rates would depict
- social studies - 1)An interest rate is a special type of? a. loan b. price c. ...

More Related Questions