Which three of the following are hypotheses relating to the term structure of interest rates?

Question

Quizplus · Accepted Answer

The expectation hypothesis suggests that the shape of the yield curve is determined by market participants' expectation of future interest rates. The liquidity hypothesis suggests that the shape of the yield curve is determined by the supply and demand for different maturities, with longer-term securities being less liquid and therefore requiring a higher yield. The market-segmentation hypothesis suggests that the yield curve is segmented into different maturity sectors that are not substitutes for each other. The market-structure hypothesis is not a hypothesis relating to the term structure of interest rates.

Which Three of the Following Are Hypotheses Relating to the Term