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:

Allowance Account

An account used in accounting to reduce the value of accounts receivable to a more realistic amount by accounting for potential bad debts.

Uncollectibles

Debts owed to a company that are considered unlikely to be recovered or paid.

Aging of Receivables

The process of categorizing accounts receivable by their due dates to estimate bad debt expenses.