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Question
The unbiased expectations theory of the term structure of interest rates
A. assumes that long-term interest rates are an arithmetic average of short-term rates.
B. assumes that the yield curve reflects the market's current expectations of future short-term interest rates.
C. recognizes that forward rates are perfect predictors of future interest rates.
D. assumes that risk premiums increase uniformly with maturity.
E. None of the above.
Answer
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