Chapter 15, Problem 6CP

A

Summary Introduction

To determine: It is to be determined that Van Husen conclusion is correct or not on the basis of the pure expectation theory.

Introduction:

The forecasting of the future short term interest rate with the help of the long term interest rate is known as expectation theory.

The uncertainty in the interest rate varies or increases with time and based on this concept Liquidity Preference is proposed.

B

Summary Introduction

To determine: It is to be determined that what yield curve implied about the direction of future expected short-term interest rates.

Introduction: The uncertainty in the interest rate varies or increases with time and based on this concept Liquidity Preference is proposed.

The forecasting of the future short term interest rate with the help of the long term interest rate is known as expectation theory.