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Which statement is correct about the term structure model

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Reference no: EM132949757

Problem 1: Which of the following statement is CORRECT about the term structure model?

a. A higher spread in the yield curve predicts a lower risk premium.

b. The term-structure model assumes that the expected return on a corporate bond is equal to the risk-free return.

c. The formula E[1 + r] = p * (1 +k) assumes a recovery rate of 100%.

d. None of the other statements is correct.

Reference no: EM132949757

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