The Liquidity Preference Theory States That an Investor

question 10

Multiple Choice

The liquidity preference theory states that an investor

• A) does not consider interest rate risk.
• B) wishes to reduce price risk.
• C) assumes a declining yield curve.
• D) will prefer a maturity to a rollover strategy.

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Definitions:

Shipping Cost

The expense associated with transporting goods from one location to another.

Net Investment

The total amount invested in a project or asset after deducting depreciation or other capital allowances.

MACRS Depreciation

Stands for Modified Accelerated Cost Recovery System, which is a method of depreciation in the U.S. that allows for the accelerated write-off of property under certain conditions.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts.