If the Expectations Theory of the Term Structure of Interest

Multiple Choice

If the expectations theory of the term structure of interest rates is correct,and if the other term structure theories are invalid,and we observe a downward sloping yield curve,which of the following is a true statement?

A) Investors expect short-term rates to be constant over time.
B) Investors expect short-term rates to increase in the future.
C) Investors expect short-term rates to decrease in the future.
D) It is impossible to say unless we know whether investors require a positive or negative maturity risk premium.
E) The maturity risk premium must be positive.