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Problem 3 Part 1 Attempt 1/17 for 10 pts. Which of the following statements is true about the expectations hypothesis? The theory states that liquidity

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Problem 3 Part 1 Attempt 1/17 for 10 pts. Which of the following statements is true about the expectations hypothesis? The theory states that liquidity premiums should be positive, because short term investors dominate the market. The theory assumes that liquidity premiums should be negative, because forward rates will generally be lower than expected short term rates. The theory assumes that long-term investors dominate the market. The theory states that liquidity premiums are zero, because the forward rate equals the market's expectation of future short term interest rates. Submit

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