Under the Pure Expectations Theory, if these investors believe that interest rates will rise in the near future, O Three statements are correct. O Two statements are correct. the large supply of funds in the short-term market will force annualized yields down, while the reduced supply of long-term funds forces long-term yields up. O they will make up for the lower short-term yield when the short-term securities mature, and they reinvest at a higher rate (if interest rates rise) at maturity. O they will invest their funds mostly in the short-term risk-free securities so that they can soon reinvest their funds in securities that offer higher yields after interest rates increase. their actions cause funds to flow into the short-term market and away from the long-term market. All statements are correct.
Under the Pure Expectations Theory, if these investors believe that interest rates will rise in the near future, O Three statements are correct. O Two statements are correct. the large supply of funds in the short-term market will force annualized yields down, while the reduced supply of long-term funds forces long-term yields up. O they will make up for the lower short-term yield when the short-term securities mature, and they reinvest at a higher rate (if interest rates rise) at maturity. O they will invest their funds mostly in the short-term risk-free securities so that they can soon reinvest their funds in securities that offer higher yields after interest rates increase. their actions cause funds to flow into the short-term market and away from the long-term market. All statements are correct.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Under the Pure Expectations Theory, if these investors believe that interest rates will rise
in the near future,
O Three statements are correct.
O Two statements are correct.
O the large supply of funds in the short-term market will force annualized yields down, while the
reduced supply of long-term funds forces long-term yields up.
O they will make up for the lower short-term yield when the short-term securities mature, and they
reinvest at a higher rate (if interest rates rise) at maturity.
O they will invest their funds mostly in the short-term risk-free securities so that they can soon
reinvest their funds in securities that offer higher yields after interest rates increase.
their actions cause funds to flow into the short-term market and away from the long-term market.
O All statements are correct.
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