State the pure expectations theory

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Reference no: EM132044431

a) State the Pure (Unbiased) Expectations Theory.

b) How is the liquidity preference theory supposed to address the shortcomings of the pure expectations theory? [Hint: Time to maturity and liquidity premium]

c) Briefly discuss how the liquidity preference theory explains the shape of the yield curve. [Hint: Time to maturity and liquidity premium]

Reference no: EM132044431

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