According to the Liquidity Preference Theory of the Term Structure

question 20

Multiple Choice

According to the liquidity preference theory of the term structure of interest rates an increase in the yield on long term corporate bonds versus short term bonds could be due to _______.

• A) declining liquidity premiums
• B) expectation of an upcoming recession
• C) a decline in future inflation expectations
• D) increase in expected interest rate volatility

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Definitions:

Chemist

A scientist who studies the composition, properties, and reactions of substances to create new compounds or products.

Veterinarian

A medical professional who practices veterinary medicine, diagnosing and treating diseases, disorders, and injuries in animals.

Doses

The measured quantity of a medicine or drug to be taken at one time or at certain intervals.

Kilometers

A unit of length in the metric system equal to 1,000 meters, often used to measure distances between geographical locations.