Liquidity Premium Theory Suggests That

Multiple Choice

Liquidity premium theory suggests that:

A) there is a downward bias in the yield curve.
B) the market for some securities may be thinly traded;hence,investors require a reward for this risk.
C) there is an upward bias in the yield curve because interest rate risk decreases with term to maturity.
D) there is a premium due to uncertainty about the future level of interest rates.