Consider the zero coupon Treasury bond yield curve. Suppose a 1 year bond has a...
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Consider the zero coupon Treasury bond yield curve. Suppose a 1 year bond has a yield of 2.13%. The yield curve slopes downwards between maturities of 1 year and 3 years, and then slopes upwards. Which of the following must be true?
Group of answer choices
A) The yield of a zero coupon bond with maturity 5 years is higher than 2.13%.
B) A 1 year positive coupon bond must have a lower price than the zero coupon bond with the same maturity.
C) Bond purchasers believe the Fed will decrease rates in the short run, and then increase them in the long run.
D) The economy will be in a recession within 2 years.
E) C and D.
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