32. The "yield curve" a. always has a positive slope. b. shows the relationship between default risk and the return on securities. c. has constant slope and height over time. d. a and b c. none of the above 33. The term structure of interest rates or yield curve is the pattern of interest rate yields for debt securities that are similar in all respects except for differences in a. tax status b. liquidity c. risk of default d. term or maturity 34. If the yield curve is downward sloping, what is the yield to maturity on a 10-year Treasury coupon bond, relative to that on a 1-year T-bond? a. The yield on the 10-year bond is less than the yield on a 1-year bond. b. The yield on a 10-year bond will always be higher than the yield on a 1-year bond because of maturity risk premiums. c. It is impossible to tell without knowing the coupon rates of the bonds. d. The yields on the two bonds are equal. e. It is impossible to tell without knowing the relative risks of the two bonds. 35. Which of the following statements is most correct? 1. The yield on a 3-year Treasury bond cannot exceed the yield on a 10-year Treasury bond. b. The yield on a 2-year corporate bond will always exceed the yield on a 2-year Treasury bond. c. The yield on a 3-year corporate bond will always exceed the yield on a 2-year corporate bond. d. Statements band e are correct. e. All of the statements above are correct. 36. If the yield curve is normal, what is the interest rate on a 20-year Treasury bond, compared to the interest rate on a 5-year Treasury bond? 1. The interest rate on the 20-year bond will be more than the interest rate on the 5-year bond. b. The interest rate on the 5-year bond will be more than the interest rate on the 20-year bond. c. The interest rates of the two bonds will be equal. d. It is impossible to tell without knowing the relative risks of the bonds. Page 7 of 12