Identify whether each of the following statements is true or false.

Statements

If inflation is expected to decrease in the future and the real rate is expected to remain steady, then the Treasury yield curve is

downward sloping. (Assume MRP = 0.)

All else equal, the yield on new bonds issued by a leveraged firm will be less than the yield on the new bonds issued by an

unleveraged firm.

The yield curve for a BBB-rated corporate bond is expected to be above the US Treasury bond yield curve.

Yield curves of highly liquid assets will be lower than yield curves of relatively illiquid assets.

UC Teld

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True False

O

O

O

O