According to the Liquidity Premium Theory of the Term Structure

question 91

Multiple Choice

According to the liquidity premium theory of the term structure,

• A) because buyers of bonds may prefer bonds of one maturity over another, interest rates on bonds of different maturities do not move together over time.
• B) the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds plus a term premium.
• C) because of the positive term premium, the yield curve cannot be downward-sloping.
• D) all of the above.
• E) only A and B of the above.

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Definitions:

Fluid Intelligence

The ability to think abstractly, reason quickly, and solve problems in novel situations, independent of acquired knowledge.

WISC-IV

The fourth edition of the Wechsler Intelligence Scale for Children, a widely used test to assess cognitive ability in children.

Cognitive Functioning

The mental capacity for processing information, acquiring knowledge, and understanding through thought and experience.

Giftedness

Exceptional natural ability or talent in one or more domains of human capability.