In Some Time Periods, There Is Evidence That Corporations Initially

question 57

Multiple Choice

In some time periods, there is evidence that corporations initially financed long-term projects with short-term funds. They planned to borrow long-term funds once interest rates were lower. Thisspecifically supports the ____ for explaining the term structure of interest rates.

• A) liquidity premium theory
• B) expectations theory
• C) segmented markets theory
• D) A and C

---

Definitions:

Earn Interest

The process by which money deposited in a savings account or investment grows over time due to the payment of interest.

Months

Units of time measurement that constitute roughly one-twelfth of a year, used in planning and tracking various financial activities.

Interest

The cost of borrowing money or the payment received for lending money, usually expressed as a percentage of the principal.

Investment

Investment involves allocating resources, usually money, with the expectation of earning an income or profit over time.