Question 573 bond pricing, zero coupon bond, term structure of interest rates, expectations hypothesis, liquidity premium theory, forward interest rate, yield curve In the below term structure of interest rates equation, all rates are effective annual yields and the numbers in subscript represent the years that the yields are measured over: (1 + ro-3) = (1 + 80-1)(1+n1-2)(1 + r2-3) Which of the following statements is NOT correct? (a) If the expectations hypothesis is true, then the forward rates are the expected future spot rates. (b) If the liquidity premium theory is true, then the forward rates are lower than the expected future spot rates due to the liquidity premium. (c) The yield curve is normal when: 10-1 11-2 > 12-3