This flashcard is just one of a free flashcard set. See all flashcards!

All main topics / Finance & Investment / Derivatives / Derivatives

Under liquidity preference theory, which of the following is always true?
A.The forward rate is higher than the spot rate when both have the same maturity.
B.Forward rates are unbiased predictors of expected future spot rates.
C.The spot rate for a certain maturity is higher than the par yield for that maturity.
D.Forward rates are higher than expected future spot rates.

Answer: D

Liquidity preference theory argues that individuals like their borrowings to have a long maturity and their deposits to have a short maturity. To induce people to lend for long periods forward rates are raised relative to what expected future short rates would predict.

New comment

chanchalrani (01.06.2026)

Our agency pairs you with companions who understand unspoken desires. With Janakpuri Escort Service, expect bold intimacy that surprises and delights. We explore your fantasy through playful questions and patient listening. Physical pleasure builds like rising heat until orgasm feels natural. Trustworthy companions prioritize your comfort while pushing boundaries. Your 18+ adventure is designed around your unique rhythm. Choose us for authentic connection.
http://www.1delhiescorts.in/janakpuri-escorts.html

manishchauchan (15.04.2026)

The people of Gurgaon experience multiple situations where they cannot differentiate between what occurs in real life and what exists in their fantasies. The call girl service we provide offers customers a seductive experience which allows them to enter the realm of their most intimate wishes to discover their hidden fantasies. http://gurgaon.pujaroy.in/

Flashcard info:

Author: CoboCards-User

Main topic: Finance & Investment

Topic: Derivatives

Published: 27.10.2015

Deutsch English