Which of the Following Statements Is CORRECT

question 76

Multiple Choice

Which of the following statements is CORRECT?

• A) Downward sloping yield curves are inconsistent with the expectations theory.
• B) The actual shape of the yield curve depends only on expectations about future inflation.
• C) If the pure expectations theory is correct,a downward sloping yield curve indicates that interest rates are expected to decline in the future.
• D) If the yield curve is upward sloping,the maturity risk premium must be positive and the inflation rate must be zero.
• E) Yield curves must be either upward or downward sloping - they cannot first rise and then decline.

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