Which of the Following Statements Is Implied by the Existence

question 10

Multiple Choice

Which of the following statements is implied by the existence of no-arbitrage in a risk-neutral pricing framework?

• A)All bonds will have the same expected return irrespective of maturity.
• B)Expected long-term bond rates of return will be higher than expected short-term bond rates of return.
• C)Each period,bonds of all maturities will have the same expected rate of return.
• D)The probability of rates moving up versus moving down is fifty-fifty.

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