Which of the following statements is/are true;

(I) Default risk is the risk of a companys credit rating downgraded from AA to BBB.

(II) 5 year Government of Canada bonds have a higher liquidity risk than 5 year corporate bonds.

(III) If the yield curve is inverted, according to the expectations theory rates are expected to fall in the near future. In this case a bond portfolio with duration of 6 years is better positioned than a portfolio with duration of 4 years.

• A.

  II

• B.

  I

• C.

  None of the statements are true

• D.

  III