Which of the Following Statements Is CORRECT

question 48

Multiple Choice

Which of the following statements is CORRECT?

• A) the most likely explanation for an inverted yield curve is that investors expect inflation to increase.
• B) the most likely explanation for an inverted yield curve is that investors expect inflation to decrease.
• C) if the yield curve is inverted, short-term bonds have lower yields than long-term bonds.
• D) inverted yield curves can exist for treasury bonds, but because of default premiums, the corporate yield curve can never be inverted.
• E) the higher the maturity risk premium, the higher the probability that the yield curve will be inverted.

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Definitions:

Notes Payable

A financial obligation or written promissory note requiring the borrower to pay back the lender the principal amount plus any interest by a specified date.

Interest

The charge for borrowing money, calculated as a percentage of the principal amount.

Cash Dividends

Payments made by a company to its shareholders from its profits or reserves, typically in the form of cash.

Dividends Payable

liabilities representing the amount of dividends declared by a company's board but not yet paid to shareholders.