Liquidity Preference Theory Suggests That When Bond Investors Move from Short-Term

question 57

Multiple Choice

Liquidity preference theory suggests that when bond investors move from short-term securities to long term securities

• A) they are expecting short-term rates to fall.
• B) they are expecting long-term rates to rise.
• C) they believe that they can earn a higher rate of return over the long term by buying bonds with longer maturities than they could by buying a series of short-term investments.
• D) they want to be protected from the risk of falling bond prices in the future.

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