Which of the following statements is CORRECT? If the maturity risk premium (MRP)

Question

Which of the following statements is CORRECT? If the maturity risk premium (MRP) is greater than zero, then the yield curve must have an upward slope. Because long-term bonds are riskier than short-term bonds, yields on long-term Treasury bonds will always be higher than yields on short-term T-bonds. If the maturity risk premium (MRP) equals zero, the yield curve must be flat. The yield curve can never be downward sloping. If inflation is expected to increase in the future, and if the maturity risk premium (MRP) is greater than zero, then the yield curve will have an upward slope.

Explanation / Answer

If inflation is expected to increase in the future and the maturity risk premium (MRP) is greater than zero, the yield curve will be upward sloping.

so ans is e

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