The Key Assumption of the Liquidity Premium Theory Is That

question 92

Multiple Choice

The key assumption of the liquidity premium theory is that investors

• A) view bonds of different maturities as perfect substitutes.
• B) view bonds of different maturities as completely unsubstitutable.
• C) always choose the bond with the highest expected return, regardless of maturity.
• D) care about both expected returns and time to maturity.

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Definitions:

Quarterly Estimated Payments

Payments made to the IRS by self-employed individuals or entities that anticipate owing tax of $1,000 or more, paid in four equal installments throughout the year.

Estimated Payment

refers to tax payments made in advance throughout the year, based on an estimate of the taxpayer's annual income.

Corporate AMT Exemption

An exemption that prevents corporations from having to pay the Alternative Minimum Tax up to a certain threshold of income.

AMT

Alternative Minimum Tax, a separate tax system in the United States designed to ensure that certain taxpayers pay at least a minimum amount of tax.