According to the liquidity premium theory of the term structure
A) because buyers of bonds may prefer bonds of one maturity over another, interest rates on bonds of different maturities do not move together over time.
B) the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds plus a term premium.
C) because of the positive term premium, the yield curve will not be observed to be downward sloping.
D) the interest rate for each maturity bond is determined by supply and demand for that maturity bond.
B
You might also like to view...
Joe has $50, which he spends on movies and pizza. If the price of a pizza falls, Joe can
A) consume more of both goods. B) consume more pizza only if he gives up some movies. C) consume more movies only if he gives up some pizza. D) consume more pizza only.
All else constant, an increase in the amount of government spending on roads and bridges would cause GDP in the domestic economy to increase
Indicate whether the statement is true or false
All of the following are examples of fringe benefits except
A. health insurance. B. retirement payments. C. overtime payments. D. education subsidies.
Quotas on an imported product
A. benefit domestic producers of the product. B. benefit foreign producers of the product. C. benefit domestic consumers of the product. D. hurt foreign consumers of the product.