Consider the Liquidity Preference Theory of the Term Structure of Interest

question 39

Multiple Choice

Consider the liquidity preference theory of the term structure of interest rates.On average,one would expect investors to require _________.

• A) a higher yield on short term bonds than long term bonds
• B) a higher yield on long term bonds than short term bonds
• C) the same yield on both short term bonds and long term bonds
• D) the liquidity preference theory cannot be used to make any of the other statements.

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Definitions:

Single Delivery

Refers to the process where all goods under a contract are delivered at once, rather than in separate instalments.

Installments

Payments made over time in parts or fractions towards settling a total debt or purchase price.

Commercial Impracticability

A doctrine under which a party may be released from a contract due to unforeseen and hardship-causing events that make the contract's performance infeasible.

Contractual Obligations

Legal commitments arising from contracts that parties have agreed to and are bound to fulfill.