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:

Plant and Equipment

Tangible long-term assets owned by a business, used in the production or supply of goods and services.

Goodwill

An intangible asset that arises when a business is acquired for more than its fair market value, reflecting factors like reputation, brand, and customer loyalty.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating the liquidity and operational efficiency of the business.

Current Assets

Short-term assets that are expected to be converted into cash, sold, or consumed within one year or within the business's operating cycle, whichever is longer.