Which of the Following Statements Is CORRECT

question 48

Multiple Choice

Which of the following statements is CORRECT?

• A) The higher the maturity risk premium,the higher the probability that the yield curve will be inverted.
• B) The most likely explanation for an inverted yield curve is that investors expect inflation to increase.
• C) The most likely explanation for an inverted yield curve is that investors expect inflation to decrease.
• D) If the yield curve is inverted,short-term bonds have lower yields than long-term bonds.
• E) Inverted yield curves can exist for Treasury bonds,but because of default premiums,the corporate yield curve can never be inverted.

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Definitions:

Return on Investment

A measure of the profitability of an investment, calculated as the net gain from an investment divided by the cost of the investment.

Average Operating Assets

The average value of the assets utilized to generate revenue during a specific period, often calculated by averaging the beginning and ending asset values for the period.

Stockholders' Equity

The equity held by shareholders in a company, calculated as the company's assets minus its outstanding debts, representing their residual ownership.

Net Operating Income

A measure of a company's profitability from its regular business operations, excluding deductions of taxes and interest expenses.