According to the expectation theory
A) markets are segmented and buyers stay in their own segment
B) the long term spot rate is an average of the current and expected future short term interest rates c the term structure will most often be upward sloping
D liquidity premiums are negative and time varying

Question

Quizplus · Accepted Answer

The expectation theory suggests that the long-term interest rates are determined by the market's expectations for future short-term rates, meaning the long-term spot rate is an average of current and expected future short-term rates.

According to the Expectation Theory