Pure expectations hypothesis of the term structure

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Reference no: EM131911186

1. We observe that the slope of yield curve is negative (downward sloping). According to the pure expectations hypothesis of the term structure of interest rates, this is an indication that __________.

A) short term interest rate is expected to rise in the future

B) long term interest rate is expected to rise in the future

C) short term interest rate is expected to fall in the future

D) long term interest rate is expected to fall in the future

2. Barry Cuda just purchased a new home for $210,000. The suggested dollar amount of his homeowners insurance is-

A) $168,000

B) $178,000

C) $189,000

D) $200,000

Reference no: EM131911186

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