Under the Preferred Habitat Theory, the Expectation That Future Short-Term

question 65

Multiple Choice

Under the preferred habitat theory, the expectation that future short-term rates will be constant results in a yield curve that

• A)is flat.
• B)slopes upward.
• C)slopes downward.
• D)is flat, slopes upward, or slopes downward, depending on the size of the term premium at each maturity.