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(Please show all work and step by step calculations, thank you!) Which of the following statements is CORRECT? a. The pure expectations theory of the

(Please show all work and step by step calculations, thank you!)

Which of the following statements is CORRECT?

a. The pure expectations theory of the term structure states that borrowers generally prefer to borrow on a long-term basis while savers generally prefer to lend on a short-term basis, and as a result, the yield curve is normally upward sloping.
b. The maturity premiums embedded in the interest rates on U.S. Treasury securities are due primarily to the fact that the probability of default is higher on long-term bonds than on short-term bonds.
c. Liquidity premiums are generally higher on Treasury than on corporate bonds.
d. Reinvestment rate risk is lower, other things held constant, on long-term than on short-term bonds.
e. If the maturity risk premium were zero and interest rates were expected to decrease in the future, then the yield curve for U.S. Treasury securities would, other things held constant, have an upward slope.

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