Which ONE of the Following Statements Is True

question 20

Multiple Choice

Which ONE of the following statements is true?

• A) The longer the maturity of a security, the greater its interest rate risk.
• B) If investors believe inflation will be subsiding in the future, the prevailing yield will be upward sloping.
• C) The real rate of interest varies with the business cycle, with the lowest rates seen at the end of a period of business expansion and the lowest at the bottom of a recession.
• D) The interest risk premium always adds a downward bias to the slope of the yield curve.

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Definitions:

Transform Boundary

A type of fault where tectonic plates slide past one another horizontally, leading to earthquakes but not substantial vertical movement.

Mid-ocean Ridge

An underwater mountain range, formed by plate tectonics, that encircles the globe, marked by volcanic activity and seafloor spreading.

Island Arc

A curved chain of volcanic islands located at a tectonic plate margin, formed by the subduction of an oceanic plate.

Mantles Rise

The upward movement of mantle material in the Earth, often related to thermal convection and tectonic processes.