According to the Liquidity Premium Theory, the Expected Yield on a Two-Year

question 36

Multiple Choice

According to the liquidity premium theory, the expected yield on a two-year security will ____ the expected yield from consecutive investments in one-year securities.

• A) equal
• B) be less than
• C) be greater than
• D) B and C are possible, depending on the size of the liquidity premium

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Definitions:

Overt Behavior

Overt behavior refers to observable actions and responses of an individual that can be seen and measured directly by others.

Retained

Kept in possession or memory; not lost or forgotten.

Self-reinforcement

The process by which individuals reward themselves for reaching certain goals or exhibiting desirable behaviors, thus encouraging repeated action.

Personal Standards

Refers to the individual benchmarks or expectations one sets for themselves in various aspects of their lives, influencing behavior and self-assessment.