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 3-year corporate bond should always exceed the yield on a 2-year corporate bond.
D) The yield on a 10-year AAA-rated corporate bond should always exceed the yield on a 5-year AAA-rated corporate bond.
E) 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.
Correct Answer:
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