Multiple Choice
The liquidity premium theory of the term structure
A) indicates that today's long-term interest rate equals the average of short-term interest rates that people expect to occur over the life of the long-term bond.
B) assumes that bonds of different maturities are perfect substitutes.
C) suggests that markets for bonds of different maturities are completely separate because people have different preferences.
D) does none of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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