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    expectations theory

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    Which of the following is most correct?

    a.If the expectations theory is correct (that is, maturity risk premium = 0) then an upward sloping yield curve means that the market believes that interest rates will rise in the future.
    b.A 5-year corporate bond may have a yield less than a 10 year treasury bond.
    c.The yield curve for corporate bonds may be upward sloping even if the Treasury yield curve is flat.
    d.Statements b and c are correct.
    e.All the statements above are correct.

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    Solution Preview

    The expectations theory would say that an upward sloping yield curve implies that future interest ...

    Solution Summary

    The Expectation theory is demonstrated.

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