If the Treasury yield curve is downward sloping,how should the yield to maturity on a 10-year Treasury coupon bond compare to that on a 1-year T-bill?
A) The yield on a 10-year bond would be less than that on a 1-year bill.
B) The yield on a 10-year bond would have to be higher than that on a 1-year bill because of the maturity risk premium.
C) It is impossible to tell without knowing the coupon rates of the bonds.
D) The yields on the two securities would be equal.
E) It is impossible to tell without knowing the relative risks of the two securities.

Question

Quizplus · Accepted Answer

When the Treasury yield curve is downward sloping, it indicates that shorter-term interest rates are higher than longer-term rates, which means the yield on a 10-year bond would be less than that on a 1-year bill.

If the Treasury Yield Curve Is Downward Sloping,how Should the Yield