Assuming the pure expectations theory is correct, an upward-sloping yield curve implies interest rates are expected to increase in the future. An interest rate is the sum of the periodic interest payments.
Using the current long-term interest rates as a starting point, the hypothesis of wishes attempts to predict what the short-term interest rate will be in the future. According to the theory, a speculator today would earn the same amount of income by investing in two consecutive one-year bond speculations as opposed to one 2-year bond. Additionally known as the "theory of unequal expectations," the hypothesis.
According to the expectancies principle, the long-term interest rates are rising to the average of the short-term rates projected to prevail. According to the expectation theory, certain yield curves with an upward sloping cause an increase in short-term levels, and vice versa. Due to lower short-term rates than long-term rates, the yield graph is tilted upward-sloping.
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