Under Liquidity Preference Theory,which of the Following Is Always True

question 17

Multiple Choice

Under liquidity preference theory,which of the following is always true?

• A) The forward rate is higher than the spot rate when both have the same maturity.
• B) Forward rates are unbiased predictors of expected future spot rates.
• C) The spot rate for a certain maturity is higher than the par yield for that maturity.
• D) Forward rates are higher than expected future spot rates.

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Definitions:

Three-stage Model

A model describing memory processing in three stages: sensory memory, short-term memory, and long-term memory.

Psychology

Scientific study of behavior and mental processes.

Memory

The mental capacity for storing and retrieving information.

Short-term Memory

Retaining a small volume of information actively on hand in the brain for a quick moment.