You are a financial analyst for the CMC Corporation. This corporation predicts changes in the economy, such as interest rates, retail trends, and unemployment. Your job is to educate incoming analyst on the terminology, definitions, and uses of interest rate theories, yield curves, and predictions. In your next training session, you will cover major theories that have been developed to explain resulting yield curves and the term structure of interest rates. Prepare a training guide with the following:

Define and compare the following theories: expectations theory, liquidity theory, market segmentation theory, and preferred habitat hypothesis theory.
In 3 pages, explain how each of the above theories explain changes in the economy.
Provide examples for each, and be sure to use and properly cite scholarly sources.

preview of the answer..

Expectation theory proposes that the forward rate in current long term bonds is closely related to the bond markets expectation of the future short-term interest rate (Ali et al., 2015) . This theory tends to explain the term structure of interest rate. Expectation theory also explains the yield curve however it has proven inaccurate in practice as interest rate tend to remain flat when the yield curve is normal (Ali et al., 2015). Additionally, expectation theory often predicts …

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