The Liquidity Premium Theory of the Term Structure of Interest

question 46

Multiple Choice

The liquidity premium theory of the term structure of interest rates is best supported by what type of yield curve?

• A) a decreasing curve over time.
• B) a flat yield curve.
• C) an increasing yield curve over time.
• D) a twisted yield curve
• E) none of the above.

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Definitions:

Activation

Refers to the process of stimulating something to act or function.

Direction

Guidance or supervision towards the path or course to be followed.

Vigor

Physical strength, good health, or intense activity; the quality of being vibrant and energetic.

Activation

The process of stimulating something to increase its level of action or operational state, often used in biological and neurological contexts.