The Treasury yield curve is Downward sloping. Empirical data indicate that a positive maturity risk premium applies to both Treasury and corporate bonds. Empirical data also indicate that there is no liquidity premium for Treasury securities but that a positive liquidity premium is built into corporate bond yields. Which of the following is not necessarily correct

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21-07-2022
Business

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The Treasury yield curve is Downward sloping. Empirical data indicate that a positive maturity risk premium applies to both Treasury and corporate bonds. Empirical data also indicate that there is no liquidity premium for Treasury securities but that a positive liquidity premium is built into corporate bond yields. Which of the following is not necessarily correct

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Tutorconsortium319 Tutorconsortium319 · Answer 1 · 2022-07-27T10:43:09+02:00

A 5-year corporate bond must have a higher yield than a 10-year Treasury bond.

What do you understand by corporate bond?

A firm can raise funds by issuing debt in the form of corporate bonds. Corporate bonds can be actively traded on the secondary market, but when an investor purchases one, they are making a loan to the company in exchange for several interest payments.

What do you mean by Treasury Bond?

Treasury bonds (sometimes known as T-bonds) are fixed-rate debt instruments issued by the US government, with maturities ranging from 10 to 30 years. T-bonds offer semi-annual interest payments up until maturity when the owner is given the bond's face value.

Why do corporate bonds have a higher yield than Treasury bonds?

Since corporate bonds carry a risk of default but Treasury bonds are guaranteed if held to maturity, corporate bonds often have a higher yield than Treasury bonds.

Learn more about corporate and treasury bonds: https://brainly.com/question/14869211

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