The ________ of the term structure states the following: the interest

The ________ of the term structure states the following: the interest rate on a long-term bond will equal an average of short-term interest rates expected to occur over the life of the long-term bond plus a term premium that responds to supply and

demand conditions for that bond. A) segmented markets theory
B) expectations theory
C) liquidity premium theory
D) separable markets theory

ANSWER

C