Answer If the maturity risk premium (MRP) is greater than zero, then the yield c

Question

Answer

If the maturity risk premium (MRP) is greater than zero, then the yield curve must have an upward slope.

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.

The yield curve can never be downward sloping.

If the maturity risk premium (MRP) equals zero, the yield curve must be flat.

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.

A.

If the maturity risk premium (MRP) is greater than zero, then the yield curve must have an upward slope.

B.

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.

C.

The yield curve can never be downward sloping.

D.

If the maturity risk premium (MRP) equals zero, the yield curve must be flat.

E.

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.

Explanation / Answer

If the maturity risk premium (MRP) equals zero, the yield curve must be flat.

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