Question: Question 2 5 2 pts Assuming that the term structure of interest rates is determined as posited by the pure expectations theory, which of the

Question

25

2

pts

Assuming that the term structure of interest rates is determined as posited by the pure expectations theory, which of the following statements is CORRECT?

Inflation is expected to be zero.

The maturity risk premium is assumed to be zero.

An upward

-

sloping yield curve implies that future short

-

term rates are expected to decline.

Consumer prices as measured by an index of inflation are expected to rise at a constant rate.

Question 2 5 2 pts Assuming that the term

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