Finance: In the foreseeable future, the real risk-free rate of investment, r*, is expected to remain at 3%, inflation is expected to steadily increase, and the maturity risk premium is expected to be 0.1(t-1)%, where t is the number of years until the bond matures. Given this information, which of the following statements is Correct? A. The yield on 2-yeah Treasury securities must exceed the yield on 5-year Treasury Securities. B. The Yield on 5-year Treasury Securities must exceed the yield on 10-year corporate bonds. C. The yield on 5-year corporate bonds must exceed the yield on 8-year Treasury bonds. D. The yield curve must be “humped” E. The Yield curve must be upward sloping.
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