According to the Liquidity Premium Theory, the Expected Yield on a Two-Year

question 36

Multiple Choice

According to the liquidity premium theory, the expected yield on a two-year security will ____ the expected yield from consecutive investments in one-year securities.

• A) equal
• B) be less than
• C) be greater than
• D) B and C are possible, depending on the size of the liquidity premium

---

Definitions:

Federal Government

The national government of a federal country, which holds the authority to govern the entire nation.

Land Speculators

Individuals or entities that purchase land with the aim of profiting from its future increase in value rather than its use.

Mexican Families

Kinship groups in Mexico, characterized by diverse structures, customs, and values, often with strong emphasis on extended family ties.

Canning and Packing Houses

Facilities where food items are processed, preserved, and packaged for distribution and sale.