If the Yield Curve Is Downward Sloping, What Is the Yield

question 34

Multiple Choice

If the yield curve is downward sloping, what is the yield to maturity on a 30-year Treasury bond relative to a 10-year Treasury bond?

• A) The yield on the 10-year bond must be greater than the yield on the 30-year bond.
• B) The yield on the 10-year bond must be less than the yield on the 30-year bond.
• C) The yields on the two bonds are equal.
• D) We need to know the other risk premiums to answer this question.

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