The following information relates to Questions 49-57liz Tyo is a fund manager for an actively managed global fixed-income fund that buys bonds
issued in Countries A, b, and
-With respect to their discussion of yield curves, Tyo and her assistant are most likely dis- cussing which term structure theory?
A) Pure expectations theory
B) local expectations theory
C) liquidity preference theory

Question

Quizplus · Accepted Answer

The liquidity preference theory suggests that investors demand a premium for the increased risk of longer-term investments, which is relevant in the context of managing a global fixed-income fund that involves assessing various bond yields and their maturity periods. This theory helps explain why longer-term bonds might offer higher yields to compensate for their greater risk, a consideration important for a fund manager like Liz Tyo.

The Following Information Relates to Questions 49-57liz Tyo Is a Fund