Which of the Following Statements Is CORRECT

question 75

Multiple Choice

Which of the following statements is CORRECT?

• A) Even if the pure expectations theory is correct,there might at times be an inverted Treasury yield curve.
• B) If the yield curve is inverted,short-term bonds have lower yields than long-term bonds.
• C) The higher the maturity risk premium,the higher the probability that the yield curve will be inverted.
• D) Inverted yield curves can exist for Treasury bonds,but because of default premiums,the corporate yield curve cannot become inverted.
• E) The most likely explanation for an inverted yield curve is that investors expect inflation to increase in the future.

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Definitions:

Central Limit Theorem

A statistical theory stating that the distribution of sample means approximates a normal distribution as the sample size becomes larger, assuming all samples are identical in size, regardless of the population's distribution.

Discrete Distribution

A type of probability distribution where the variable can take on a countable number of distinct values.

Probability Density Function

A function that describes the likelihood of a continuous random variable falling within a particular range of values.

Total Area

In statistical terms, often refers to the entirety of the area under a probability distribution curve, which equals 1 or 100%.