Multiple Choice
The liquidity premium theory holds that investors
A) always choose the bond with the highest expected return, regardless of maturity.
B) require a term premium to compensate them for investing in a less preferred maturity.
C) view bonds of different maturities as perfect substitutes.
D) view bonds of different maturities as completely unsubstitutable.
Correct Answer:
Verified
Correct Answer:
Verified
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