If the pure expectations theory is correct (that is, the maturity risk premium is zero), which of the following is CORRECT?
A. An upward-sloping Treasury yield curve means that the market expects interest rates to decline in the future.
B. A 5-year T-bond would always yield less than a 10-year T-bond.
C. The yield curve for corporate bonds may be upward sloping even if the Treasury yield curve is flat.
D. The yield curve for stocks must be above that for bonds, but both yield curves must have the same slope.
E. If the maturity risk premium is zero for Treasury bonds, then it must be negative for corporate bonds.
Answer: C
You might also like to view...
Sal has been in the landscaping business for over 40 years. When Jaime, his business partner, suggested adding snow removal as an extra service, Sal responded with "My gut feeling is to say yes because of my experience in the past and what I have seen other companies do over the years, both successfully and not." Sal is acting on _____ in his response to Jaime.
A. a knowledge dilemma B. a business reaction C. a knee-jerk reaction D. unbounded rationality E. intuition
A company that is ethnocentric in its approach to PR will not extend home-country PR activities into host countries
Indicate whether the statement is true or false
Cash interest is computed annually when a bond is issued for other than its face value. For a bond issued at a premium, how will this component change as the bond approaches maturity?
a. decrease b. increase c. remain constant d. not enough information given to decide
A nonprofit chief executive officer (CEO) displays little commitment to the organization’s mission. According to Blake and Mouton, the CEO has what type of management style?
A. team B. country club C. impoverished D. authority–obedience