Which of the following explains the general shape of the yield curve?

Question

Quizplus · Accepted Answer

The general shape of the yield curve is explained by the expectations theory, which suggests that long-term interest rates are based on the average expected short-term interest rates over the same period of time. This theory assumes that investors have no preference for investing in short-term versus long-term bonds and that they expect interest rates to remain relatively stable over time.

Which of the Following Explains the General Shape of the Yield