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Assume that there are only two U.S. treasury bonds in the market. Bond A has a 2-year maturity and Bond B has a 10-year maturity.
If the yield curve is "downard sloping," which of the following must be true?
Check all that apply:
Purchasing Bond A and holding it to maturity two years later will generate a higher return than purchasing Bond B and selling it two years later.
Purchasing Bond A and holding it to maturity will produce a higher average annual return than purchasing Bond B and holding it to maturity.
Purchasing Bond A and selling it one year later will generate a higher return than purchasing Bond B and selling it one year later.
Purchasing Bond A and holding it to maturity will produce a higher cumulative total return than purchasing Bond B and holding it to maturity.
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