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djyliett [7]
4 years ago
9

Based on the pure expectations theory, is the following statement true or false?

Business
1 answer:
Annette [7]4 years ago
5 0

Answer:

The correct answer is letter "B": False.

Explanation:

The Pure Expectations Theory uses long-term interest rates to predict future interest rates in the short run. Investors consider different investments to predict future interest rates. In the example, the statement indicates the opposite. It is taking a short-term interest rate (one-year bond), to calculate the return of a long-term investment (five-year bond).

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A company issues 9%, 5-year bonds with a par value of $140,000 on January 1 at a price of $145,678, when the market rate of inte
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Answer:

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