If Expected Future Short-Term Interest Rates Are Equal to Current

question 18

Multiple Choice

If expected future short-term interest rates are equal to current short-term rates, the liquidity premium will

• A)make long-term rates lower than current short-term rates.
• B)make long-term rates higher than current short-term rates.
• C)make long-term rates equal to current short-term rates.
• D)make have no effect.

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