Based Solely on the Maturity Preference Theory, Long-Term Interest Rates

question 42

Multiple Choice

Based solely on the maturity preference theory, long-term interest rates:

• A)should equal short-term rates.
• B)are unrelated to short-term rates.
• C)may be higher than or lower than short-term rates.
• D)should be lower than short-term rates.
• E)should be higher than short-term rates.

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Definitions:

Miller-Orr Model

A finance model that helps in managing cash flows and cash reserves in a business efficiently.

Cash Flows

The aggregate quantity of cash flowing both in and out of a corporation, impacting its liquid assets.

Target Balance

A predetermined amount of money that a company or individual aims to have in an account at any given time.

Minimum Balance

The least amount of money that a bank requires a customer to have in an account to qualify for specific services or to avoid certain fees.