The liquidity premium theory of the term structure maintains that investors require an extra return to induce

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The liquidity premium theory of the term structure maintains that investors require an extra return to induce them to lend for longer periods. The reason that investors require this inducement is:

A. Because, historically, the term structure has more often sloped upwards than downwards.

B. To compensate them for expected inflation.

C. Because it’s the way people preferences tend to be

D. To compensate them for default risk.

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Finance Applications and Theory

ISBN: 978-0077861681

3rd edition

Authors: Marcia Cornett, Troy Adair

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Posted Date: Feb 13, 2024 01:48 AM

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The liquidity premium theory of the term structure maintains that investors require an extra return to induce

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Finance Applications and Theory

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