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If the market predicts a constant 5% interest rate into the future then Question 9 options: 1 the expectations theory would predict a flat yield

If the market predicts a constant 5% interest rate into the future then Question 9 options:

1 the expectations theory would predict a flat yield curve while the liquidity premium theory would predict an upward-sloping yield curve

2both the expectations theory and the liquidity premium theory would predict a flat yield curve

3both the expectations theory and the liquidity premium theory would predict an upward-sloping yield curve

4the expectations theory would predict an upward-sloping yield curve while the liquidity premium theory would predict a flat yield curve

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