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Which of the following statements is CORRECT? e yild on a 3-year Treasury bond cannot exceed the yield on a 10-year Treasury bond. b. The real risk-free rate is higher for corporate than for Treasury bonds. c. Liquidity premiums are higher for Treasury than for corporate bonds. d.The Pure Expectations Theory assumes that the Maturity Risk Premium for long-term Treasury bonds is zero The Maturity Risk Premium a. b. c s affects only corporate bonds is a decreasing function of a bond's term to maturity is a positive function of a bond's term to maturity under the Pure Expectations Theory affects the real rate of interest is a premium that compensates investors for interest rate risk Interest rate risk is captured by the inflation premium is the risk of capital loss due to interest rate increases during the life of a bond and is also called price risk a. b. is greater for lower rated 88 bonds than it is for higher rated AA bonds d. c. is a premium added to the interest rate of a security that cannot be converted to cash on short notice decreases if there are technological innovations that increase the demand for capital (TRUE or FALSE) The yield curve is a graphical representation of the term structure o and has time (days, months, or years) on the x-axis, and bond yield on the y-axis for a given default risk-class of bonds. Keenan Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon and a $1,000 par value and a market pfice of $1,164.54. The bond can be called in 6 years at a price of $1,045. What is the bond's yield to call? a. b. . d. e. 6.77% 5.09% 4.42% 5.54% 5.60% Moerdyk Corporation's bonds have a 15-year maturity, a 7.25% annual coupon, and a par value of $1,000. The going interest rate (ra) is 5.00%, what is the bond's price? a. $1,233.54 b. $976.02 c. $1,457.85 d. $1,050.15 e. $1,359.01