contestada

Under the liquidity premium theory the shape of the yield curve depends on:_________

a. the relative return of investments in common stocks versus investments in corporate bonds.
b. the size of the federal government's budget deficit.
c. government tax treatment of long-term versus short-term bonds.
d. the expected pattern of future short-term rates and the size of the term premium at each maturity.

Respuesta :

Martebi

Answer:

Option d: The expected pattern of future short-term rates and the size of the term premium at each maturity

Explanation:

Liquidity premium theory is simply said to be a form of or the interest rate on a long-term bond that will equal an average of short-term interest rates expected to be in existence/ Occurrence in the overall the life of the long-term bond plus a liquidity premium that answers(responsed) to supply and demand conditions for that bond.

Term structure is regarded or said to be the relationship between interest rates and the yeild to maturity, where risk of default is held constant.

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