4. You have been asked to predict the shape of the yield curve using the term structure theories outlined below. The results of your analysis is as follows:

Expectations Theory: Investors expect rates to rise significantly in the future due to higher inflationary expectations. Preferred Habitat & Market Segmentation Theory: Pension funds & insurance companies continue to be large buyers of long-dated Treasury bonds (e.g. 10-30 year maturities), while the US Treasury continues to issue more short-term (T-bills) and intermediate-term notes and LESS long-dated Treasury bonds.