The One-Year Interest Rate Is 4

question 52

Multiple Choice

The one-year interest rate is 4%.The interest rate for a two-year security is 6%.The one-year interest rate one year from now is 8.34%.According to the liquidity preference theory,the risk premium for the second one-year investment is

• A) 0.50%.
• B) 0.34%.
• C) 0.30%.
• D) 1.66%.

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Definitions:

Competence

The ability to perform work tasks successfully.

Potential

The inherent ability or capacity of an individual, object, or concept to develop into something more substantial or perform at a higher level in the future.

Coercive Power

A form of power that is based on the ability to deliver punishments or impose penalties for noncompliance.

Social Intelligence

The ability to understand and manage interpersonal relationships effectively, including the capacity to navigate social environments and understand the dynamics at play.