The liquidity preference theory

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Reference no: EM132048734

1. Empirical evidence of liquidity premium indicates

(a) the longer the maturity, the larger the liquidity premium.

(b) they exist for up to one-year maturity.

(d) they don't exist.

(e) they don't exist for declining yield curves.

2. If investors feel that half of the time future spot rates will rise and half of the time they will decline, the liquidity preference theory

(a) shows the average yield curve will be flat.

(b) does not explain the declining yield curve situation.

(d) is not valid.

(e) suggests there will be a majority of upward sloping yield curves.

Reference no: EM132048734

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