Which of the Following Statements Is CORRECT

question 4

Multiple Choice

Which of the following statements is CORRECT?

• A) If the maturity risk premium (MRP) is greater than zero, then the yield curve must have an upward slope.
• B) Because long-term bonds are riskier than short-term bonds, yields on long-term Treasury bonds will always be higher than yields on short-term T-bonds.
• C) If the maturity risk premium (MRP) equals zero, the yield curve must be flat.
• D) The yield curve can never be downward sloping.
• E) If inflation is expected to increase in the future, and if the maturity risk premium (MRP) is greater than zero, then the yield curve will have an upward slope.

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Definitions:

Short-Term Memory

Activated memory that holds a few items briefly, such as the seven digits of a phone number while dialing, before the information is stored or forgotten.

Memory Trace

A theoretical concept proposing that memories are stored as physical or chemical changes in the brain.

Physical Basis

The fundamental material or bodily foundation underlying a phenomenon, behavior, or process.

Short-Term Memory

A capacity for holding a small amount of information in an readily available state for a short period of time, typically involving recent events or knowledge in use.