Closely related to the ________ is the preferred habitat theory,which takes a somewhat less direct approach to modifying the expectations hypothesis but comes to a similar conclusion.
A) liquidity premium theory
B) expectations theory
C) market segmentation theory
D) supply theory

Question

Quizplus · Accepted Answer

The preferred habitat theory is related to the expectations hypothesis, but it takes a indirect approach to modifying it. The liquidity premium theory, on the other hand, directly challenges the expectations hypothesis by suggesting that investors demand a premium for holding longer-term bonds. The market segmentation theory and supply theory are not directly related to the expectations hypothesis or the preferred habitat theory.

Closely Related to the ________ Is the Preferred Habitat Theory,which