According to the Liquidity Premium Theory of Interest Rates

Multiple Choice

According to the liquidity premium theory of interest rates,

A) long-term spot rates are higher than the average of current and expected future short-term rates.
B) investors prefer certain maturities and will not normally switch out of those maturities.
C) investors are indifferent between different maturities if the long-term spot rates are equal to the average of current and expected future short-term rates.
D) the term structure must always be upward sloping.
E) long-term spot rates are totally unrelated to expectations of future short-term rates.