Which of the Following Statements Is CORRECT

question 60

Multiple Choice

Which of the following statements is CORRECT?

• A) If the maturity risk premium were zero and interest rates were expected to decrease in the future, then the yield curve for U.S. Treasury securities would, other things held constant, have an upward slope.
• B) Liquidity premiums are generally higher on Treasury than corporate bonds.
• C) The maturity premiums embedded in the interest rates on U.S. Treasury securities are due primarily to the fact that the probability of default is higher on long-term bonds than on short-term bonds.
• D) Default risk premiums are generally lower on corporate than on Treasury bonds.
• E) Reinvestment rate risk is lower, other things held constant, on long-term than on short-term bonds.

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Definitions:

Environmental Context

The set of physical, social, and economic conditions surrounding and affecting the existence or development of an entity or subject.

Political Pluralism

The acknowledgment and acceptance of diversity in political beliefs and ideologies within a society.

International Economic Factors

Encompass global influences that impact the economic conditions of countries, such as trade policies, exchange rates, and international investment flows.

Culture as Economic Indicator

Culture as an economic indicator involves looking at cultural trends and values to glean insights into economic health and consumer behavior.