Question 6 2 p Given some amount to be received several years into the future, the higher the interest rate assumption that can be earned during those years, the present value of that future amount will be higher Stay the same Will be variable lower Which of the following statements is correct? According to the Market Segmentation Theory of the term structure of interest rates, we should normally expect the yield curve to slope downward. The Expectation Hypothesis theory of the term stsructure of interest rates states that borrowers generally prefer to borrow on a long term basis while savers generally prefer to loan on a short term basis and, as a result, the yield curve normally is upward sloping. Reinvestment rate risk is lower, other things held constant, on long term rather than on short term bonds. The maturity premiums embedded in the interest rates of U.S. Treasury securities are due primarily to the fact that the probability of default is higher on long term bonds than on short term bonds. IF the maturity risk premium were zero and if the rate of inflation were expected to decrease in the future, then the yield curve for U. S. Treasury securities would, other thinks held constant, have an upward slope