Suppose the yield curve is upward sloping, but that expected


Question Description:

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Suppose the yield curve is upward sloping, but that expected future short-term rates are constant. This may be because A) compounding results in non-linear effects which increase long-term yields B) bondholders prefer to hold short-term bonds for liquidity reasons C) bondholders prefer to hold long-term bonds for liquidity reasons D) markets are irrational E) none of the above

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