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Course: Business Finance Explain the Pure Expectation Theory and the Liquidity Preference Theory of the term structure of interest rates. What does each theory imply

Course: Business Finance

Explain the Pure Expectation Theory and the Liquidity Preference Theory of the term structure of interest rates. What does each theory imply about the relationship between the forward interest rate and the expected interest rate for next year? Explain. What does each theory imply about expected future interest rates when the yield curve is positively sloping?

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