Under the Liquidity Premium Theory a Flat Yield Curve Implies

question 7

Multiple Choice

Under the Liquidity Premium Theory a flat yield curve implies:

• A)there is no risk premium for longer-term maturities.
• B)short-term interest rates are expected to remain constant.
• C)short-term interest rates are expected to decrease.
• D)long-term interest rates are higher than short-term interest rates.

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