According to the Liquidity Premium Theory of the Term Structure

question 76

Multiple Choice

According to the liquidity premium theory of the term structure

• A)because buyers of bonds may prefer bonds of one maturity over another,interest rates on bonds of different maturities do not move together over time.
• B)the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds plus a term premium.
• C)because of the positive term premium,the yield curve will not be observed to be downward sloping.
• D)the interest rate for each maturity bond is determined by supply and demand for that maturity bond.

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Definitions:

Fabricating Department

A part of manufacturing where raw materials are transformed into parts or products through processes like cutting, welding, and assembling.

Daily Basis

A period or measure referring to events or processes that occur or are calculated on a day-to-day basis.

Design Department

A division within a company responsible for developing new products or improving existing ones through research, planning, and design.

Labor Constraint

Is a restriction or limit within a production or project environment that pertains to the availability or efficiency of labor.