The theory of the yield curve holds that required returns on long-term securities tend to be greater the longer the time to maturity.
A)expectations
B)market segmentation
C)preferred habitat
D)liquidity premium

Question

Quizplus · Accepted Answer

The liquidity premium theory suggests that investors demand a premium for holding longer-term securities due to increased risk and reduced liquidity, leading to higher required returns for longer maturities.

The Theory of the Yield Curve Holds That Required Returns