- CFA Exams
- CFA Level I Exam
- Study Session 12. Fixed Income (1)
- Reading 32. The Term Structure and Interest Rate Dynamics
- Subject 5. Traditional Theories of the Term Structure of Interest Rates
CFA Practice Question
According to liquidity preference theory, a flat yield curve means the market expects interest rates to:
A. increase.
B. remain the same.
C. decline.
Explanation: The decline is will be offset exactly by the liquidity premium, resulting a flat yield curve.
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