Which of the following statements is CORRECT?Select one:a. When the yield curve is strictly...

Which of the following statements is CORRECT?

Select one:

a. When the yield curve is strictly downward sloping, the term spread must be positive.

b. A flight to quality during the recession increases the default risk premium.

c. The market capitalization of a corporation is the total market value of its common stocks.

d. Legal tender is the provision that shields owners of a corporation from losing more than what they have invested in the firm.

Solutions

Expert Solution

Answer = correct option is B

A flight to quality during the recession increase default of risk premium

Other option are incorrect because -

In option A, when the yield curve is Downward sloping, the term spread must be negative and not positive
In option C ,The market capitalisation of a corporation is the total market value of its outstanding stocks and not comman stocks
In option D, limited liability is the provision that shields owners of corporation from losing more than what they have invested in the firm. So legal tender is incorrect

Rahul Sunny answered 1 year ago

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