Which of the following statements is CORRECT?
A. The yield on a 2-year corporate bond should always exceed the yield on a 2-year Treasury bond.
B. The yield on a 3-year corporate bond should always exceed the yield on a 2-year corporate bond.
C. The yield on a 3-year Treasury bond should always exceed the yield on a 2-year Treasury bond.
D. If inflation is expected to increase, then the yield on a 2-year bond should exceed that on a 3-year bond.
E. The real risk-free rate should increase if people expect inflation to increase.
Answer: A
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