The _________ theory states that to induce investors to hold long-term securities they must be paid a higher interest rate than they would require on short-term securities.

Question

Quizplus · Accepted Answer

The maturity preference theory posits that investors require a higher interest rate on long-term securities to be induced to hold them, rather than short-term securities. This is due to the perceived increased risk and uncertainty associated with holding a security for a longer period of time. The other theories listed relate to different factors that may impact interest rates in the market.

The _________ Theory States That to Induce Investors to Hold