Which of the Following Statements Is CORRECT

question 4

Multiple Choice

Which of the following statements is CORRECT?

• A) If the maturity risk premium (MRP) is greater than zero, then the yield curve must have an upward slope.
• B) 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.
• C) If the maturity risk premium (MRP) equals zero, the yield curve must be flat.
• D) The yield curve can never be downward sloping.
• E) 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.

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Definitions:

Key Stimulus

A specific environmental cue that triggers a fixed action pattern in an animal.

Fixed Action Pattern

A sequence of unlearned acts directly linked to a specific stimulus, which is virtually inevitable and once begun, is carried to completion.

Innate Action Pattern

A pre-programmed response that is triggered by specific environmental stimuli, characteristic of a particular species.

Eyebrow Flick

An often subconscious facial gesture involving a quick raise and lower of the eyebrow, sometimes indicating interest or recognition.