Which of the Following Statements Is CORRECT

question 98

Multiple Choice

Which of the following statements is CORRECT?

• A)If inflation is expected to increase in the future, and if the maturity risk premium (MRP) is greater than zero, then the yield curve will have an upward slope.
• B)If the maturity risk premium (MRP) is greater than zero, then the yield curve must have an upward slope.
• C)Because long-term bonds are riskier than short-term bonds, yields on long-term Treasury bonds will always be higher than yields on short-term T-bonds.
• D)If the maturity risk premium (MRP) equals zero, the yield curve must be flat.
• E)The yield curve can never be downward sloping.

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Definitions:

Plant Size

Plant Size pertains to the capacity or physical dimensions of a manufacturing or production facility.

Diseconomies of Scale

A situation where, as a firm increases production, the costs per unit increase instead of decreasing due to inefficiencies.

Output

The total amount of goods or services produced by a person, machine, or company within a certain period.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, leading to a decrease in the per unit cost as output increases.