Business, 20.06.2020 22:57, queentynaisa

Inflation is expected to increase steadily over the next 10 years, there is a positive maturity risk premium on both Treasury and corporate bonds, and the real risk-free rate of interest is expected to remain constant. Which of the following statements is correct? 1. The yield on 7-year corporate bonds must exceed the yield on 10-year Treasury bonds.
2. The Treasury yield curve under the stated conditions would be humped rather than have a consistent positive or negative slope.
3. The yield on 10-year Treasury securities must exceed the yield on 7-year Treasury securities
4. The stated conditions cannot all be true they are internally inconsistent.
5. The yield on any corporate bond must exceed the yields on all Treasury ; bonds.

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Inflation is expected to increase steadily over the next 10 years, there is a positive maturity risk...