Which of the Following Statements Is Correct

Multiple Choice

Which of the following statements is correct?

A) The probability of default is higher on short-term bonds than on long-term bonds.
B) Reinvestment rate risk is lower, other things held constant, on long-term than on short-term bonds.
C) According to the market segmentation theory, the yield curve is expected to slope downward.
D) Borrowers prefer to borrow on a short-term basis, as a result, the yield curve is downward sloping.
E) If the inflation is expected to decrease in the future, then the yield curve should have an upward slope.