When Expectations Theory Is Combined with the Liquidity Theory, the Yield

question 51

True/False

When expectations theory is combined with the liquidity theory, the yield on a security will always be equal to the yield from consecutive investments in shorter-term securities over the same investment horizon.
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Definitions:

Creditor

Someone who has a claim to assets.

Promissory Note Payable

A financial instrument that signifies a written promise by one party to pay a specific sum of money to another party under agreed terms.

360-Day Year

A simplified method of calculating interest for commercial loans or bonds that assumes each month has 30 days, resulting in a 360-day year.

Interest

The cost of borrowing money or the return on investment, typically expressed as a percentage over a period of time.