Question
in the foreseeable future, the real risk-free rate of interest, r, is expected to remiain at 3%, inflation is expected to steadily increase, and the
in the foreseeable future, the real risk-free rate of interest, r", is expected to remiain at 3%, inflation is expected to steadily increase, and the maturity risk premium is expected to be 0.10% (t-1), where t is the number of years until the bond matures. Given this information, which of the following statements is correct?
The yield on 5-year Treasury securities must exceed the yield on 10-year corporate bonds. The yield on 2-year Treasury securities must exceed the yield an 5 year Treasury securities. The yield curve must be upward sloping. The yield on 5-year corporate bonds must exceed the yield on 8-year Treasury bonds. The yield curve must be humped.
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