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Investments glossary

Expectations Theory

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Quotes of the day:

a good tooth, gets no gold

— Severin Meiland

Expectations theory attempts to predict what short-term interest rates will be in the future based on current long-term interest rates. The theory suggests that an investor earns the same amount of interest by investing in two consecutive one-year bond investments versus investing in one two-year bond today. The theory is also known as the unbiased expectations theory.


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