Based solely on the maturity preference theory, long-term interest rates:
A)should equal short-term rates.
B)are unrelated to short-term rates.
C)may be higher than or lower than short-term rates.
D)should be lower than short-term rates.
E)should be higher than short-term rates.

Question

Quizplus · Accepted Answer

Maturity preference theory suggests that investors prefer short-term securities and require a premium for holding longer-term securities, leading to higher long-term interest rates.

Based Solely on the Maturity Preference Theory, Long-Term Interest Rates