Liquidity Premium Theory Suggests That

question 50

Multiple Choice

Liquidity premium theory suggests that:

• A)there is a downward bias in the yield curve.
• B)the market for some securities may be thinly traded;hence,investors require a reward for this risk.
• C)there is an upward bias in the yield curve because interest rate risk decreases with term to maturity.
• D)there is a premium due to uncertainty about the future level of interest rates.

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