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:

Bad Debts

Bad debts are amounts owed to a company that are no longer considered collectible, leading to their recognition as a loss.

Adjustment

An entry in accounting made to correct, alter, or update the financial records and statements of a company.

Adjusting Journal Entry

An entry made in a journal at the end of an accounting period to allocate income and expenditure to the appropriate period.

Balance Sheet Approach

A method of estimating a company's value by focusing on its balance sheet, particularly its assets and liabilities.