Analyze each of the following statements and determine whether it is True, False, or Uncertain. Marking will be based entirely on the supporting arguments. Therefore, try to be thorough in your answers and base your discussion on the theories that have been reviewed in this course.

a)Nancy noticed that the Canadian bonds yield curve is upward sloping. She reported to her manager that short term interest rates will increase. Nancy's prediction about the short interest rates rising is consistent with both the liquidity premium theory and the segmented market theory.

b)The risk structure of the interest rates is the relationship among interest rates of bonds with the same maturities. The difference between the risk structure and the term structure is that the term structure is the best way to plot the yield curve in a graph to be used for prediction purposes.

c)A decrease of the liquidity of corporate bonds will increase the price of corporate bonds and will increase the yield of Government of Canada bonds, everything else held constant.

d)If the expected pathof a 1-year interest rate over the next five years is 2%,3%, 4%, 5%, and 6%, then the expectations theory predicts that today's interest rate on a 5 year bond is 5%