The liquidity premium theory of the term structure helps, Financial Management

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The liquidity premium theory of the term structure helps

The liquidity premium theory of the term structure helps explain why on average, the Treasury yield curve typically slopes upward. The liquidity premium theory relies on the fact that the longer the maturity, the less liquid the bond and thus, the higher the interest rate (lower the price), since investors require a liquidity premium in order to purchase the longer-term security.

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Financial Management: The liquidity premium theory of the term structure helps

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