If the expectations theory of the term structure of interest rates is correct, and if the other term structure theories are invalid, and we observe a downward sloping yield curve, which of the following is a true statement??
A. ?Investors expect interest rates to be constant over time.
B. ?Investors expect interest rates to increase in the future.
C. ?Investors expect interest rates to decrease in the future.
D. ?Investors require a positive maturity risk premium.
E. ?The maturity risk premium must be positive.
Answer: C
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Fill in the blank(s) with correct word