The Yield Curve Theory That Hypothesises That Investors Prefer Short-Term

question 60

Multiple Choice

The yield curve theory that hypothesises that investors prefer short-term securities because of the risk associated with longer term securities is the:

• A) expectations hypothesis.
• B) liquidity premium hypothesis.
• C) market segmentation theory.
• D) capital markets theory.

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Definitions:

Common-value Auction

An auction format where the item for sale has a value that is essentially the same for all bidders, but the bidders may have different information about that value.

Oral Auctions

Auctions where bids are made verbally, allowing for real-time, competitive bidding among participants.

Reveal Information

The act of making previously unknown or secret information known to others.

Common Value Auctions

Auctions in which the item for sale has a single, unknown value to all bidders, leading to challenges in valuing the item correctly.