Business, 26.11.2019 06:31 SmartScholar4094

Assume the following: the real risk-free rate, r*, is expected to remain constant at 3%. inflation is expected to be 3% next year and then to be constant at 2% a year thereafter. the maturity risk premium is zero. given this information, which of the following statements is correct? the yield curve for u. s. treasury securities will be upward sloping.

a 5-year corporate bond must have a lower yield than a 5-year treasury security.

a 5-year corporate bond must have a lower yield than a 7-year treasury security.

the real risk-free rate cannot be constant if inflation is not expected to remain constant.

this problem assumed a zero maturity risk premium, but that is probably not valid in the real world.

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Assume the following: the real risk-free rate, r*, is expected to remain constant at 3%. inflation...

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