Which of the following is consistent with the liquidity premium theory of the yield curve? Check all that apply.

If liquidity influences the yield curve, a flat yield curve suggests that the market thinks interest rates in the future will decrease.

If liquidity influences the yield curve, an upward$-$sloping yield curve suggests that the market thinks interest rates in the future will increase.

If liquidity influences the yield curve, an upward$-$sloping yield curve suggests that the market thinks interest rates in the future will decrease.

If liquidity influences the yield curve, a flat yield curve suggests that the market thinks interest rates in the future will remain the same.

Rosa would like to invest a certain amount of money for two years and considers investing in a one$-$year bond that pays $3$ percent and a two$-$year bond that pays $7$ percent. Rosa is considering the following investment strategies:

Strategy A: Buy a one$-$year bond that pays $3$ percent and in year one, then buy another one$-$year bond that pays the forward rate in year two.

Strategy B: Buy a two$-$year bond that pays $7$ percent in year one and $7$ percent year two.

If the one$-$year bond purchased in year two pays $7$ percent, and the liquidity premium on a two$-$year bond is $0\mathrm{.}7$ percent, Rosa will choose

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Which of the following describes conditions under which Rosa would be indifferent between Strategy A and Strategy B$?$

The rate on the one$-$year bond purchased in year two is $10\mathrm{.}476$ percent.

The rate on the one$-$year bond purchased in year two is $10\mathrm{.}790$ percent.

The rate on the one$-$year bond purchased in year two is $11\mathrm{.}209$ percent.

The rate on the one$-$year bond purchased in year two is $9\mathrm{.}952$ percent.