Describe the two hypotheses that explain the shape of the yield curve. (Select ail the choices that apply.) A. One hypothesis is the liquidate- preference hypothesis: investors wish to be compensated for holding longer-term bonds. B. One hypothesis is the liquidity preference hypothesis: long-term rates are the market\'s best guess of average expected short-term rates. c. Another hypothesis that explains the shape of the yield curve is the unbiased expectations hypothesis: long-term rates are the market\'s best guess of average expected short-term rates. D. Another hypothesis that explains the shape of the yield curve is the unbiased expectations hypothesis: investors wish to be compensated for holding longer-term bonds. Solution The two hypotheses that explain the shape of the yield curve are: A. One hypothesis is the liquidity preference hypothesis: investors wish to be compensated for holding long-term bonds. B. One hypothesis is the liquidity preference hypothesis: long-term rates are the market\'s best guess of average expected short-term rates. .