Under the Preferred Habitat Theory the Shape of the Yield

Multiple Choice

Under the preferred habitat theory the shape of the yield curve depends on

A) the relative return of investments in common stocks versus investments in corporate bonds.
B) the size of the federal government's budget deficit.
C) government tax treatment of long-term versus short-term bonds.
D) the expected pattern of future short-term rates and the size of the term premium at each maturity.