According to the preferred habitat theory
A)investors prefer longer to shorter maturities.
B)investors prefer shorter to longer maturities.
C)investors are indifferent between short and long maturities.
D)investors are more interested in the tax treatment of bonds than they are in the liquidity of bonds.

Question

Quizplus · Accepted Answer

The preferred habitat theory suggests that investors have a preference for a certain type of bond, based on factors such as maturity and risk level. In regards to maturity, some investors may prefer shorter maturities due to the lower interest rate risk and the ability to reinvest the principal sooner. However, others may prefer longer maturities for the higher yields and potentially greater capital appreciation. Ultimately, it depends on the individual investor's preferences and investment goals.

According to the Preferred Habitat Theory