Which statement describes the expectations hypothesis of the term structure?

Which statement describes the expectations hypothesis of the term structure?

• A. Long-term rates are determined solely by central bank policy rates.
• B. Long-term rates reflect expected future short-term rates.
• C. Long-term rates are unrelated to expectations about the future.
• D. Long-term rates depend only on the current yield curve and not on expectations.

Answer: (B)