Multiple Choice
Which of the following statements explains the liquidity premium theory of the term structure of interest rates?
A) Investors will pay higher prices for longer-term securities.
B) Investors demand a lower yield for securities that cannot be sold quickly at high prices.
C) Investors demand a higher return on longer-term securities with greater price risk and less marketability.
D) Investors will pay higher prices for securities with greater price risk and less marketability.
Correct Answer:
Verified
Correct Answer:
Verified
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