Question
The liquidity preference theory of the yield curve postulates that investors require the real rate of return to rise in direct proportion to the length
The liquidity preference theory of the yield curve postulates that
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investors require the real rate of return to rise in direct proportion to the length of time to maturity.
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investors require higher short-term interest rates today than long term rates because they have to reinvest in new bonds in the future.
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investors expect higher long-term interest rates than short-term rates to compensate for the added risk involved holding long-term bonds.
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investors are unique in that they only interact in the market at their specific maturity preferences.
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