There might at times be an inverted treasury yield curve

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Reference no: EM131025541

Which of the following is CORRECT?

Even if the pure expectations theory is correct, there might at times be an inverted Treasury yield curve.

If the yield curve is inverted, short-term bonds have lower yields than long-term bonds.

The higher the maturity risk premium, the higher the probability that the yield curve will be inverted.

Inverted yield curves can exist for Treasury bonds, but because of default premiums, the corporate yield curve cannot become inverted.

The most likely explanation for an inverted yield curve is that investors expect inflation to increase in the future.

Reference no: EM131025541

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