The Liquidity Premium Theory of the Term Structure of Interest

question 28

Multiple Choice

The liquidity premium theory of the term structure of interest rates:

• A)denies the importance of expectations.
• B)only supports ascending yield curves.
• C)assumes that for a given yield investors prefer several successive short term investments rather than one long term one.
• D)assumes that investors only accept to invest in their preferred maturity.

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Definitions:

Transference

In psychotherapy, the process by which emotions originally associated with a significant person in an individual's life are unconsciously transferred to the therapist.

Freud

Sigmund Freud, an Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology.

Resistance

The act of opposing or standing against something, which can refer to physical opposition, disease immunity, or refusal to accept social norms.

Unconscious Conflicts

Internal struggles, often stemming from childhood, that reside outside of conscious awareness but influence behavior and emotions.