According to the Preferred Habitat Theory, the Yield Curve Normally

question 27

Multiple Choice

According to the preferred habitat theory, the yield curve normally has a positive slope because

• A)short-term interest rates are expected to rise.
• B)term premiums rise as the time to maturity increases.
• C)risk premiums rise over time.
• D)long-term bonds are more liquid than short-term bonds.

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Definitions:

Other Expense

Expenses that cannot be traced directly to operations.

Unusual Item

An uncommon or rare event that affects a company's financial statements, not expected to recur frequently.

Accounting Principles

A set of guidelines and rules that govern the accounting procedures and financial reporting of businesses, ensuring accuracy and consistency across industries.

Fixed Asset Impairments

A reduction in the recoverable value of a fixed asset below its carrying value, recognized as a loss in financial accounting.