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10. Which of the following statements is correct? a. If the maturity risk premium were zero and inflation rates were expected to decrease in the

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10. Which of the following statements is correct? a. If the maturity risk premium were zero and inflation rates were expected to decrease in the future, then the vield curve for U.S. Treasury securities would, other things held constant, have an upward slope. b. The maturity risk premiums embedded in the interest rates are added to compensate investors for bearing default risk c. The yield on a 1-year bond can never exceed the yield ona 10-year bond. d. None of the statements above are correct 11. If the yield curve is upward sloping, what is the yield to maturity on a 10-year Treasury coupon bond, relative to that on a 1-year T-bond? The yield on the 10-year bond is greater than the yield on a 1-year bond. b. a. The yield on a 10-year bond will be lower than the yield on a 1-year bond. The yields on the two bonds are equal. d. c. 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.. 12. Which of the following statements is NOT correct? a. If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a secondary market transaction. b. If Disney issues additional shares of common stock, this is an example of a primary market transaction. c. The NYSE is an example of an over-the-counter market. d. Capital market instruments include long-term debt and common stock. Which of the following risks do bond ratings from Moody's and S&P specifically attempt 13. to assess? Moody's S&P Ba aa BB Ca Aa A a CCC D A AAA AA Interest rate risk I. Default risk I. Maturity risk III. I only a. II only b. I and II only II and III only I, II, and II . d. e. BB

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