Exam Question
The liquidity premium theory suggests that long-term interest rates are higher than short-term interest rates because
- 1) investors generally prefer to invest short periods of time
- 2) government policy maintains this relationship
- 3) there is greater risk in long-term bonds
- 4) exchange rate fluctuations establish this relationship
View Answer
Answer 3) there is greater risk in long-term bonds
Practice set and Exam Quiz
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