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If the yield curve is upward sloping, which of the following statements is incorrect? (hint: graph the yield curves for a T-bond, a AAA bond,
If the yield curve is upward sloping, which of the following statements is incorrect? (hint: graph the yield curves for a T-bond, a AAA bond, and a B bond) Select one: a. The yield on the 5-year T-bond must be smaller than the yield on the 10-year B corporate bond. b. The yield on the 10-year T-bond must exceed the yield on a 2-year T-bond. c. The yield on the 10-year AAA corporate bond must be less than the yield on the 5-year T-bond. d. The yield on the 5-year T-bond must be smaller than the yield on the 5-year AAA corporate bond. e. The yield on the 5-year AAA corporate bond must be smaller than the yield on 5-year B corporate bond. You observe the following curve for Treasury securities: Maturity Yield 1 year 6.5% 2 years 6.3% 3 years 6.0% 4 years 5.8% 5 years 5.5% Assume that the pure expectations hypothesis holds. What is your investment return if you plan to lend for 2 years, starting three years from today? Select one: a. 6.40% b. 6.30% c. 4.75% d. 5.75% e. 4.30%
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