If the yield curve is flat for short maturities and then slopes downward for longer maturities, the liquidity premium theory (assuming a mild preference for shorter-term bonds) indicates that the market is predicting:(a) a rise in short-term interest rates in the near future and a decline further out in the future.(b) constant short-term interest rates in the near future and a decline further out in the future.(c) a decline in short-term interest rates in the near future and a rise further out in the future.(d) a decline in short-term interest rates in the near future and an even steeper decline further out in the future.

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