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(1) Rational expectation states that expectations will be identical to optimal forecasts using all available information. (2) A rational expectation equals the optimal forecasts using
(1) Rational expectation states that expectations will be identical to optimal forecasts using all available information. (2) A rational expectation equals the optimal forecasts using all available information, a prediction based on it is perfectly accurate. (3) Adaptive expectations theory is the same as rational expectations theory. (4) If ination had been steady from 2010-2018 at a 5% rate, using the adaptive information, we know that the expectations of ination in 2019 would also be 5%. (5) Market efcient hypothesis is an application of the theory of Rational Expectations. (6) If the stock prices did not follow a random walk, there would be unexploited prot opportunities in the market. (7) The return on the bond equals the YTM on that bond. (8) For a one year holding period bond with no coupon payment, the interest rate = YTM = Return on that bond. (9) Highly rated investment grade bonds are those with the highest risk of default. (10) Aat yield curve is the one in which the short-term yields are at normal level, but the long-term yields are higher
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