The Theory That States Yield Curve Shape Is Formed by the Relationship

question 15

Multiple Choice

The theory that states yield curve shape is formed by the relationship of supply and demand curves for various security maturities is

• A) liquidity preference theory.
• B) term structure theory.
• C) market segmentation theory.
• D) risk minimization theory.

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Definitions:

Capitalization Of Interest

The process of adding accumulated interest to the principal balance of a loan, increasing the total amount owed.

Avoidable Interest

Interest cost on funds expended on a qualifying asset that could be avoided if the expenditure had not been made.

Economic Benefit

The gain received from a product or service, often measured in terms of increased utility or revenue, minus associated costs.

R&D Costs

Expenses incurred during the research and development phase aimed at producing new products or processes.