Which of the Following Statements Is CORRECT

question 55

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) Reinvestment rate risk is lower,other things held constant,on long-term than on short-term bonds.
• C) The pure expectations theory of the term structure states that borrowers generally prefer to borrow on a long-term basis while savers generally prefer to lend on a short-term basis,and as a result,the yield curve is normally upward sloping.
• D) 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.
• E) Liquidity premiums are generally higher on Treasury than on corporate bonds.

Understand the concept of simple linear regression including scatter diagrams, least squares regression lines, and interpreting slope.

Apply statistical methods to estimate values using regression equations.

Analyze the validity of linear models for given datasets.

Discuss the implications of statistical findings in real-world contexts.

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Definitions:

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