Which of the following statements is CORRECT? a. The yield on a 3-year Treasury

Question

Which of the following statements is CORRECT?

a. The yield on a 3-year Treasury bond cannot exceed the yield on a 10-year Treasury bond.
b. The yield on a 2-year corporate bond should always exceed the yield on a 2-year Treasury bond.
c. The yield on a 10-year AAA-rated corporate bond should always exceed the yield on a 5-year AAA-rated corporate bond.
d. The following represents a "possibly reasonable" formula for the maturity risk premium on bonds: MRP = -0.1%(t), where t is the years to maturity.
e. The yield on a 3-year corporate bond should always exceed the yield on a 2-year corporate bond.

Explanation / Answer

b. The yield on a 2-year corporate bond should always exceed the yield on a 2-year Treasury bond.

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