Question 2 The liquidity premium theory of the term structure of interest rates A. assumes that investors will hold long-term maturity assets if there is a sufficient premium to compensate for the uncertainty of the long-term. B. assumes that long-term interest rates are an arithmetic average of short-term rates plus a liquidity premium. nation Statele C. recognizes that forward rates are perfect predictors of future interest rates. D. assumes that risk premiums increase uniformly with maturity