Under the Liquidity Premium Theory a Flat Yield Curve Implies

question 33

Multiple Choice

Under the liquidity premium theory a flat yield curve implies:

• A) there is no risk premium for longer-term maturities.
• B) short-term interest rates are expected to remain constant.
• C) short-term interest rates are expected to decrease.
• D) long-term interest rates are higher than short-term interest rates.

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Definitions:

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Observable and predictable sequences or arrangements in data, behavior, or events, which can be identified and often used for analysis or prediction.

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