Question: The expectations hypothesis states that the forward rate equals the expected future short rate. Which of the following factors could make the forward rate different

The expectations hypothesis states that the forward rate equals the expected future short rate. Which of the following factors could make the forward rate different from the expected future short rate?

I. Liquidity premium

II. Changes in inflation expectations

III. Changes in the real rate

Select one:

a. I, II, and III

b. III only

c. II only

d. I only

e. I and II, but not III

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