If the Pure Expectations Theory Holds,which of the Following Statements

question 47

Multiple Choice

If the pure expectations theory holds,which of the following statements is CORRECT?

• A) The yield curve for both Treasury and corporate bonds should be flat.
• B) The yield curve for Treasury securities would be flat,but the yield curve for corporate securities might be downward sloping.
• C) The yield curve for Treasury securities cannot be downward sloping.
• D) The maturity risk premium would be zero.
• E) If 2-year bonds yield more than 1-year bonds,an investor with a 2-year time horizon would almost certainly end up with more money if he or she bought 2-year bonds.

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Definitions:

Cash Flow From Assets

The total amount of money being transferred into and out of a company's assets, indicating the company's financial health and operational efficiency.

Operating Cash Flow

The cash generated by a company's normal business operations, reflecting its ability to generate sufficient cash to meet its needs.

Net New Borrowing

Net new borrowing is the difference between the amounts a company borrows and repays during a specific period, reflecting changes in its debt level.

Net New Equity

The difference between equity capital raised by issuing new shares and the equity capital reduced by buying back shares.