Remaining Timeminutes 18 Question Completion Status Qu Which of the following statements is correct? The expectations theory of the term structure of interest rates states that borrowers generally prefer to borrow on a long-term basis while savers generally prefer to lend on a short-term basis, and that as a result, the yield curve normally is ward sloping It is theoretically possible for the yield Curve to have a downward slope, and there have been times when such a slope kinded That situation was probably caused by investors' liquidity preferences, ie, by the factors which underlie the liquidity preterence 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 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-year T-bills are zero, then the real risk-free rate must be negative. MacBook Pro 96 5 0 E 6 7 V " R T E A J HT G F D S V B Remaining Timeminutes 18 Question Completion Status Qu Which of the following statements is correct? The expectations theory of the term structure of interest rates states that borrowers generally prefer to borrow on a long-term basis while savers generally prefer to lend on a short-term basis, and that as a result, the yield curve normally is ward sloping It is theoretically possible for the yield Curve to have a downward slope, and there have been times when such a slope kinded That situation was probably caused by investors' liquidity preferences, ie, by the factors which underlie the liquidity preterence 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 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-year T-bills are zero, then the real risk-free rate must be negative. MacBook Pro 96 5 0 E 6 7 V " R T E A J HT G F D S V B