Time to maturity and liquidity premium

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Reference no: EM132039926

a. State the Pure (Unbiased) Expectations Theory.

b. How is the liquidity preference theory supposed to address the shortcomings of the pure expectations theory? (Hint: Time to maturity and liquidity premium).

c. Briefly discuss how the liquidity preference theory explains the shape of the yield curve. (HInt: Time to maturity and liquidity premium).

Reference no: EM132039926

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