Question The expectation theory of the mature of states that borrower generally prefer to tow on a long term basi wewers general prefer to on a worms, and that as a result, the old curve normally is upward sloping ir ie theoretically pouble for the yield curve to have a downward slope, and there have been times when such a slope winted. That stution was probably caused by investors preferences, L., by the factors which undertie the liquidity preference theory. Polrestment rate rook is higher, other things held constant, on long-term than on short-term bonds. According to the market segmentation theory of the term structure of interest rates, we should normally expect the yield curve to slope downward. w the yield on a 1-year T-billes is lower than the expected rate of inflation during the coming year, and if the maturity risk and liquidity premiums on T-bills are zero, then the real risk-free rate must be negative. MacBook Pro TID l! 5 c 4 R T E F G HT K C B Remaine med utions po which of the following statement is con The expectations theory of the term structure of interest rates states that borrowers generally prefer to borrow on a long-term basis while savers gerver prefer to fend on a short-term basis, and that as a result, the yield curve normally is upward sloping It is theoretically possible for the yield curve to have a downward slope, and there have been times when such a slope existed. That situation was probably caused by investors' liquidity preferences, le., by the factors which undertie the liquidity preference theory Reinvestment rate risk is higher, other things held constant, on long-term than on short-term bonds. According to the market segmentation theory of the term structure of interest rates, we should normally expect the yield curve to slope downward. If the yield on a 1-year T-bills is lower than the expected rate of inflation during the coming year, and if the maturity risk and liquidity premiums on 1- T-bills are zero, then the real risk-free rate must be negative. MacBook Pro 6 2 R E G K