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What is Unbiased Expectations Theory Explained about?

Expectations theory predicts future short-term interest rates based on current long-term rates by assuming an investor could invest in consecutive short-term bonds to earn the same return as a long-term bond. Liquidity preference theory holds that investors prefer highly liquid assets like cash and require higher returns for riskier, long-term securities. Preferred habitat theory states that bond investors have a preferred maturity and will only invest outside that range if risk premiums are available.

Author

ZUNAIROH ZUNAIROH

Language

EN