It is expected that the interest rates on debentures will be greater than on commercial bills because:
A)a bank may not endorse commercial bills.
B)of the liquidity preference of investors.
C)debentures are typically unsecured.
D)debentures are readily marketable.

Question

Quizplus · Accepted Answer

The liquidity preference of investors means that investors prefer to hold more liquid investments, such as commercial bills that can be easily bought and sold, rather than longer-term investments like debentures. To compensate for the greater risk of illiquidity, debentures typically offer a higher interest rate than commercial bills. The other choices (A, C, D) are not as relevant to the difference in interest rates between debentures and commercial bills.

It Is Expected That the Interest Rates on Debentures Will