Which of the Following Statements Is CORRECT

question 51

Multiple Choice

Which of the following statements is CORRECT?

• A) If the maturity risk premium (MRP)is greater than zero,the Treasury bond yield curve must be upward sloping.
• B) If the maturity risk premium (MRP)equals zero,the Treasury bond yield curve must be flat.
• C) If inflation is expected to increase in the future and the maturity risk premium (MRP)is greater than zero,the Treasury bond yield curve must be upward sloping.
• D) If the expectations theory holds,the Treasury bond yield curve will never be downward sloping.
• E) 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.

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Definitions:

Two-Component Model

A theory or framework that divides a concept or phenomenon into two distinct parts for better understanding or analysis.

Attitude

A psychological tendency expressed by evaluating an entity with some degree of favor or disfavor.

Three-Component Model

A theory in psychology that describes three major components of attitude: cognitive, affective, and behavioral.

Attitudes

A settled way of thinking or feeling about someone or something, typically reflected in a person's behavior.