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22 Based on your analyses, today's pure yield curve is upward sloping. You believe in the pure expectations hypothesis of the term structure of interest
22 Based on your analyses, today's pure yield curve is upward sloping. You believe in the pure expectations hypothesis of the term structure of interest rates. Which of the following statements is/are false? Statement 1: You would buy a BBB-rated bond with coupon rate of 10% and time to maturity of 20 years rather than buy an AA-rated bond with coupon rate of 10% and time to maturity of 20 years. Statement 2: You would sell an AA-rated bond with coupon rate of 10% and time to maturity of 20 years rather than sell a BBB-rated bond with coupon rate of 10% and time to maturity of 20 years. Statement 3: You would buy a Treasury bond with coupon rate of 11%, time to maturity of 20 years, and yield to maturity of 8% rather than buy a Treasury bond with coupon rate of 10%, time to maturity of 20 years, and yield to maturity of 8%. Statement 4: You would sell a Treasury bond with coupon rate of 11%, time to maturity of 20 years, and yield to maturity of 8% rather than sell a Treasury bond with coupon rate of 10%, time to maturity of 20 years, and yield to maturity of 8%. Your choice: 22/25 Qs Statement 1 Statement 4 Statement 3 Statement 2
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