Question
According to the expectations hypothesis, which of the following statements is incorrect? a. An downward sloping term structure of interest rates implies that interest rates
According to the expectations hypothesis, which of the following statements is incorrect?
a. | An downward sloping term structure of interest rates implies that interest rates are expected to decrease in the future. | |
b. | An upward sloping term structure of interest rates implies that interest rates are expected to increase in the future. | |
c. | Observed long-term rate is a function of todays short-term rate and expected future short-term rates. | |
d. | A flat term structure of interest rates implies that interest rates are expected to keep at the same level in the future. | |
e. | A flat term structure of interest rates implies that interest rates could increase or decrease in the future. |
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