-Refer to Figures A, B, and C

question 10

Multiple Choice

-Refer to Figures A, B, and C. According to expectations theory, which of the figures reflects expectations that the short-term interest rate is expected to remain constant in the future but that borrowers and lenders also must be compensated with a liquidity premium for lending long?

• A)Figure A
• B)Figure B
• C)Figure C
• D) Both a and b

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