Question
Consider the following data obtained on Treasury STRIPS of various maturities. N Yield 1 1.25% 2 1.85% 3 2.35% According to the liquidity preference hypothesis,
Consider the following data obtained on Treasury STRIPS of various maturities.
N Yield
1 1.25%
2 1.85%
3 2.35%
According to the liquidity preference hypothesis, the rate the market expects two years from now would be (refer to the previous question)
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A. less than the one you calculated above due to the liquidity premium
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B. greater than the one you calculated above due to the liquidity premium
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C. impossible to estimate by looking at the term structure
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D. relatively unimportant in determining the shape of the yield curve
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Focus On Personal Finance An Active Approach To Help You Develop Successful Financial Skills
Authors: Jack Kapoor, Les Dlabay, Robert Hughes
4th Edition
0078034787, 978-0078034787
