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Basic Question 2 of 10
The liquidity preference theory asserts that some premiums are needed to compensate investors for added ______ they face when lending long term.
B. interest rate risk
C. credit risk
A. liquidity risk
B. interest rate risk
C. credit risk
User Contributed Comments 2
| User | Comment |
|---|---|
| davidt87 | i mean the notes also say that the theory recognises the need to compensate for the fact that long-term bonds are less liquid |
| CFAJ | I love how they are already defensive in their explanation of the answer. |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
explain how a bond's exposure to each of the factors driving the yield curve can be measured and how these exposures can be used to manage yield curve risks;
explain the maturity structure of yield volatilities and their effect on price volatility.
CFA® 2026 Level II Curriculum, Volume 4, Module 26.