Multiple Choice
Assume that the risk-free zero rates are increasing with maturity (That is, the 6-months zero rate is lower than the one-year zero rate, which is lower than the two-year zero rate, etc) . It must be that:
A) The yield-to-maturity curve for coupon bonds lies below the yield-to-maturity curve for zeros
B) The yield-to-maturity curve for coupon bonds equals the yield-to-maturity curve for zeros
C) The yield-to-maturity curve for coupon bonds lies above the yield-to-maturity curve for zeros
D) The yield-to-maturity curve for coupon bonds lies above the yield-to-maturity curve for zeros for maturities less than one year, but lies below the yield-to-maturity curve for zeros for maturities greater than one year.
Correct Answer:
Verified
Correct Answer:
Verified
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