According to the Liquidity Premium Theory,a Yield Curve That Is

question 103

Multiple Choice

According to the liquidity premium theory,a yield curve that is flat means that

• A)bond purchasers expect interest rates to rise in the future.
• B)bond purchasers expect interest rates to stay the same.
• C)bond purchasers expect interest rates to fall in the future.
• D)the yield curve has nothing to do with expectations of bond purchasers.

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Definitions:

Stocks

Shares of ownership in a company, that represent a claim on the company's earnings and assets.

Annuities

Financial products that provide a stream of payments for a fixed period or for the lifetime of the annuitant, typically used for retirement savings.

Commodities

Basic goods used in commerce that are interchangeable with other goods of the same type, such as oil, gold, and wheat.

Interest Rate Spread

The difference between the interest rates of two different financial instruments, often highlighting the comparative risk or return.