If the Yield Curve Is Observed to Be Flat,according to the Liquidity

question 79

Multiple Choice

If the yield curve is observed to be flat,according to the liquidity premium theory,this indicates that the market is predicting:

• A) a small rise in short-term rates in the near future and a small decline further out in the future.
• B) constant short-term interest rates in the near future, and further out in the future.
• C) a small decline in short-term interest rates in the near future, continuing to decline slowly further out in the future.
• D) constant short-term interest rates in the near future and a small decline further out in the future.