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Match each of the following theories with its description. (Enter a value: 14.) Theory Expectations theory Preferred habitat 3 Segmented markets 1 Description 1. The
Match each of the following theories with its description. (Enter a value: 14.) Theory Expectations theory Preferred habitat 3 Segmented markets 1 Description 1. The interest rate for each bond with a different maturity is determined by the supply of and demand for that bond, with no effects from expected returns on other bonds with other maturities. 2. The interest rate on a long-term bond will equal an average of the short-term interest rates that people expect to occur over the life of the long-term bond. 3. When short-term interest rates are low, yield curves are more likely to have an upward slope; when short-term interest rates are high, yield curves are more likely to slope downward and be inverted. 4. The interest rate on a long-term bond will equal an average of short-term interest rates expected to occur over the life of the long-term bond plus a liquidity premium (also referred to as a term premium) that responds to supply and demand conditions for that bond
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