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Liquidity premium in order to purchase longer-term security

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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.

WHY IS THIS FALSE?

Reference no: EM13835246

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