Question 8 (5 points)

According to the liquidity premium theory of the term structure

Question 8 options:

	Bonds of different maturities are not substitutes
	If yield curves are downward sloping, then short-term interest rates are expected to fall by so much that, even when the positive term premium is added, long-term rates fall below short-term rates
	Yield curves should never slope downward
	Interest rates on bonds of different maturities do not move together over time