A theory states that while investors and borrowers may normally concentrate on a particular natural maturity market, conditions may cause them to change maturity markets. This theory is called the
A)liquidity premium theory.
B)efficient markets theory.
C)pure expectations theory.
D)preferred habitat theory.

Question

Quizplus · Accepted Answer

The preferred habitat theory suggests that investors and borrowers have a preferred maturity market but may shift to other maturities under certain conditions, such as changes in yield or risk.

A Theory States That While Investors and Borrowers May Normally