Final answer:
The liquidity preference theory is consistent with yield curves sloping upward most of the time.
Step-by-step explanation:
The theory that is consistent with yield curves sloping upward most of the time is the liquidity preference theory. This theory, proposed by John Maynard Keynes, suggests that investors prefer to hold liquid assets, such as cash and short-term bonds, rather than long-term bonds. As a result, the demand for long-term bonds decreases, leading to higher yields and an upward-sloping yield curve.
The other two theories mentioned, the market segmentation theory and the expectations theory, do not necessarily predict an upward-sloping yield curve. The market segmentation theory states that investors have preferences for specific maturities and are unwilling to trade bonds outside of their preferred segments, which can result in segmented yield curves. The expectations theory suggests that long-term interest rates are determined by the market's expectations of future short-term interest rates, but it does not provide a specific prediction about the slope of the yield curve.