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A bond trader observes the following information: - The Treasury yield curve is downward sloping. - Empirical data indicate that a positive maturity risk premium

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A bond trader observes the following information: - The Treasury yield curve is downward sloping. - Empirical data indicate that a positive maturity risk premium applies to both Treasury and corporate bonds. - Empirical data also indicate that there is no liquidity premium for Treasury securities but that a positive liquidity premium is built into corporate bond yields. On the basis of this information, which of the following statements is most CORRECT? a. A 5-year corporate bond must have a higher yield than a 10-year Treasury bond. b. The corporate yield curve must be flat. c. Since the Treasury yield curve is downward sloping, the corporate yield curve must also be downward sloping. d. A 10-year corporate bond must have a higher yield than a 5-year Treasury bond. e. A 10-year Treasury bond must have a higher yield than a 10-year corporate bond

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