Answer the following statements true (T) or false (F)

1. The market segmentation theory suggests that the shape of the yield curve is determined by the supply and demand for funds within each maturity segment.
2.The liquidity preference theory suggests that the shape of the yield curve is determined by the supply and demand for funds within each maturity segment.
3.The liquidity preference theory suggests that short-term interest rates should be lower than long-term interest rates most of the time.
4.The expectations theory suggests that the shape of the yield curve reflects investors expectations about future interest rates.
5. A downward-sloping yield curve indicates generally cheaper short-term borrowing costs than long-term borrowing costs.


1. TRUE
2. FALSE
3. TRUE
4. TRUE
5. FALSE

Business

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Business