Theories of the term structure of interest rate


Discuss the below:

Briefly describe one of the below three theories of the term structure of interest rates.

1. Expectations hypothesis

2. Liquidity preference theory

3. Market segmentation theory

According to these theories, what conditions would result in a downward-sloping yield curve?

What conditions would result in an upward-sloping yield curve?

Which theory do you think is most valid, and why?

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Financial Management: Theories of the term structure of interest rate
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