<p>There is no specific terminology in the expectations theory. The terms of art have the same meaning.</p>
<p>If the holding period is equal to the time to maturity then the rate of return is equal to the yield to maturity. Simply put, if you don’t sell the bond, the capital gains will always be <span class="math-container">$0$</span>.</p>

CC BY-SA 4.0
2021-12-26T08:47:54.637Z
2021-12-26T08:47:54.637Z
LudwigNagasena
<p>My <a href="https://rads.stackoverflow.com/amzn/click/com/1292060484" rel="nofollow noreferrer" rel="nofollow noreferrer">book</a> (Financial Markets and Institutions, Mishkin et al.) treats returns and interest rates as the same thing while explaining the expectations theory in Chapter 5. However, in the previous chapter the book had stated that return = C/Pt + (Pt+1-Pt)/Pt.</p>
<p>Here's an example from the book:
<a href="https://i.sstatic.net/dOZ7W.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/dOZ7W.png" alt="enter image description here" /></a>
<a href="https://i.sstatic.net/mgljF.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/mgljF.png" alt="enter image description here" /></a></p>
<p>The question says interest rates but the solution talks in terms of returns even though they are not the same.</p>

<macroeconomics><interest-rate><expectations><yield>
Why is return same as interest rate (yield) in the expectations theory?
reasonStore
# Why is return same as interest rate (yield) in the expectations theory?

(Asked by: username_0 on 2021-12-26)

My [book](https://rads.stackoverflow.com/amzn/click/com/1292060484) (Financial Markets and Institutions, Mishkin et al.) treats returns and interest rates as the same thing while explaining the expectations theory in Chapter 5. However, in the previous chapter the book had stated that return = C/Pt + (Pt+1-Pt)/Pt.

Here's an example from the book:
[![enter image description here](https://i.sstatic.net/dOZ7W.png)](https://i.sstatic.net/dOZ7W.png)
[![enter image description here](https://i.sstatic.net/mgljF.png)](https://i.sstatic.net/mgljF.png)

The question says interest rates but the solution talks in terms of returns even though they are not the same.

**Tags:** macroeconomics, interest-rate, expectations, yield


---

## 1 answers

### Answer by username_1 on 2021-12-26. Score: 1

There is no specific terminology in the expectations theory. The terms of art have the same meaning.

If the holding period is equal to the time to maturity then the rate of return is equal to the yield to maturity. Simply put, if you don’t sell the bond, the capital gains will always be $0$.


---

