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Homework answers / question archive / Several theories of the term structure provide explanations of how interest rates on bonds with different terms to maturity are related
Several theories of the term structure provide explanations of how interest rates on bonds with different terms to maturity are related. Explain those theories in detail along with their assumption.
Also explain three important empirical facts about interest rates and discuss these three facts for each theory?
(a) Expectation theory
(b) Liquidity premium theory
(c) Segmentation theory
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