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If Expected Future Short-Term Interest Rates Are Equal to Current

Question 18

Multiple Choice

If expected future short-term interest rates are equal to current short-term rates, the liquidity premium will


A) make long-term rates lower than current short-term rates.
B) make long-term rates higher than current short-term rates.
C) make long-term rates equal to current short-term rates.
D) make have no effect.

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