QUESTION 22 According to the liquidity premium theory of the term structure, a flat yield curve indicates that short-term interest rates are expected to O rise in the future. O remain unchanged in the future. O decline moderately in the future. decline sharply in the future. QUESTION 21 According to the liquidity premium theory of the term structure because buyers of bonds may prefer bonds of one maturity over another, interest rates on bonds of different maturities do not move together over time O the interest rate for each maturity bond is determined by supply and demand for that maturity bond. because of the positive term premium, the yield curve will not be observed to be downward sloping. the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds plus a term premium. QUESTION 19 If the expected path of one-year interest rates over the next five years is 4 percent, 5 percent, 7 percent, 8 percent, and 6 percent, then the expectations theory predicts that today's interest rate on the five-year bond is o 4 percent. 5 percent. 6 percent. 7 percent