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If you observe a downward-sloping Treasury yield curve, which of the following scenario seems to be out of place? Maturity year 5 10 20 30
If you observe a downward-sloping Treasury yield curve, which of the following scenario seems to be out of place? Maturity year 5 10 20 30 years years years years A. Real risk-free rate 2.5% 2.5% 2.5% 2.5% 2.5% B. Inflation premium 5.2% 5.1% 5.0% 4.8% 4.9% C. Default risk premium 0.0% 0.0% 0.0% 0.0% 0.0% D. Maturity risk premium 0.9% 0.5% 0.3% 0.2% 0.1% E. Liquidity premium 0.0% 0.0% 0.0% 0.0% 0.0% Select one: a. Inflation Premium. b. Maturity risk premium. c. Real risk-free rate. d. Liquidity premium. e. Default risk premium. If the yield curve is upward sloping, which of the following statements is correct? (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 exceed the yield on the 5- year AAA corporate bond. b. The yield on the 5-year T-bond must be larger than the yield on the 10-year B corporate bond. c. The yield on the 5-year AAA corporate bond must be less than the yield on the 5-year T-bond. d. The yield on the 5-year AAA corporate bond must be smaller than the yield on 5-year B corporate bond. e. The yield on the 10-year T-bond must be less than the yield on a 2-year T-bond
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