Consider the Liquidity Preference Theory of the Term Structure of Interest

question 39

Multiple Choice

Consider the liquidity preference theory of the term structure of interest rates.On average,one would expect investors to require _________.

• A) a higher yield on short term bonds than long term bonds
• B) a higher yield on long term bonds than short term bonds
• C) the same yield on both short term bonds and long term bonds
• D) the liquidity preference theory cannot be used to make any of the other statements.

---

Definitions:

Normative Influence

Social influence leading individuals to conform in order to be accepted or liked by a group, following the group's norms and expectations.

Group Polarization

The phenomenon whereby a group's dominant viewpoint becomes stronger or more extreme after group discussions.

Nonverbal Communication

The process of conveying a message without the use of words, which may include facial expressions, body language, gestures, and tone of voice.

Selective Perception

The process by which individuals perceive what they want to in media messages while ignoring opposing viewpoints.