According to the Liquidity Preference Hypothesis, Yield Curves Generally Slope

question 42

Multiple Choice

According to the liquidity preference hypothesis, yield curves generally slope upward because

• A) investors prefer short maturity obligations to long maturity obligations.
• B) investors prefer long maturity obligations to short maturity obligations.
• C) investors prefer less volatile long maturity obligations.
• D) investors prefer more volatile short maturity obligations.
• E) None of these are correct.

Understand the concept and purpose of common-size comparative statements.

Calculate and interpret various financial ratios including liquidity, solvency, and profitability ratios.

Understand and apply the technique of horizontal analysis to evaluate changes in financial statements over time.

Compute trend percents to analyze the financial performance and position over multiple periods.

---

Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, reflecting the time value of money and risk.

Initial Investment

The initial outlay of money required to start a project, purchase an asset, or invest in a business venture.

Useful Life

The estimated period over which an asset is expected to be usable for the purpose it was acquired.

Salvage Value

The anticipated remaining value of an asset at the conclusion of its operational life.