Assignment Papers- Liquidity preference theory 3. Market segmentation theory
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?
