A Bond Trader Observes the Following Information

question 78

Multiple Choice

A bond trader observes the following information:
​
•The Treasury yield curve is downward sloping.
•Empirical data indicate that a positive maturity risk premium applies to both Treasury and corporate bonds.
•Empirical data also indicate that there is no liquidity premium for Treasury securities but that a positive liquidity premium is built into corporate bond yields.
​
On the basis of this information,which of the following statements is most CORRECT?

• A)A 10-year corporate bond must have a higher yield than a 5-year Treasury bond.
• B)A 10-year Treasury bond must have a higher yield than a 10-year corporate bond.
• C)A 5-year corporate bond must have a higher yield than a 10-year Treasury bond.
• D)The corporate yield curve must be flat.
• E)Since the Treasury yield curve is downward sloping, the corporate yield curve must also be downward sloping.

---

Definitions:

Promote From Within

A hiring policy favoring the advancement of current employees to higher positions over bringing in external candidates.

Lead-The-Market Pay Strategy

A compensation approach where an organization aims to offer salaries higher than the average within its sector to attract and retain top talent.

Job Posting

The process of communicating information about a job vacancy on company bulletin boards, in employee publications, on corporate intranets, and anywhere else the organization communicates with employees.

External Hiring

The practice of filling job vacancies with candidates from outside the organization.