rgonzalez

i think i went with decrease too..

leadcfa

i too put B , if yield curve remains flat , then short term interest rates has to go down to compensate for above yield interest rates in long term (due to less liquidity) .

i don't know if it's actually true or not , nothing else made any sense because it's written in CFAI that yield is complex average of spot rates , ... i'm f***ing confused :O.

dmar

I went with B too

Wasteoftime

Agreed, i actually remember this question with detail because i wrote a message next to it in the booklet to the institute saying "the answer is appropriately b but it's a crap question because if the liquidity preference is given an arbitrary value of zero it could be flat or decrease".

koba

i dont get it...why would it decrease??

If investors require a liquidy premium on top of pure expectations theory...shouldnt the yeild curve be upward sloping??


markCFAIL Wrote:
-------------------------------------------------------
> Agreed, i actually remember this question with
> detail because i wrote a message next to it in the
> booklet to the institute saying "the answer is
> appropriately b but it's a crap question because
> if the liquidity preference is given an arbitrary
> value of zero it could be flat or decrease".