In the expectations theory of the term structure with no risk, if the current and expected 1-period interest rates for the next three periods are 3%, 4% 5% and 4% respectively, the 4-period interest rate is 3% @ 4%. 0 596. 6%. Question 3 1 pts The term premium compensates for the riskiness of long-term bonds because their prices are more volatile than short-term bonds long-term bonds because their prices are less volatile than short-term bonds. short-term bonds because their prices are more volatile than long-term bonds O short-term bonds because their prices are less volatile than long-term bonds