Consider the Liquidity Preference Theory of the Term Structure of Interest

question 63

Multiple Choice

Consider the liquidity preference theory of the term structure of interest rates. On average, one would expect investors to require ________.

• A) a higher yield on short-term bonds than on long-term bonds
• B) a higher yield on long-term bonds than on short-term bonds
• C) the same yield on both short-term bonds and long-term bonds
• D) none of these options (The liquidity preference theory cannot be used to make any of the other statements.)

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