If the yield curve is flat for short maturities and then slopes downward for longer maturities, the liquidity premium theory (assuming a mild preference for shorter-term bonds) indicates that the market is predicting
A) a rise in short-term interest rates in the near future and a decline further out in the future.
B) constant short-term interest rates in the near future and a decline further out in the future.
C) a decline in short-term interest rates in the near future and a rise further out in the future.
D) a decline in short-term interest rates in the near future and an even steeper decline further out in the future.
D
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In the figure above, which budget line results in the most real income in terms of compact discs?
A) AD B) BD C) CD D) Real income is equal for all three budget lines.
During the last sixty years, the broad stock market (Standard and Poor's 500 Index) yielded an average annual nominal rate of return of approximately ____ and real rate of return of approximately ____
a. 5 percent; 2 percent b. 10 percent; 7 percent c. 17 percent; 9 percent d. 9 percent; 17 percent