Respuesta :
Assume that the current corporate bond yield curve is upward sloping, or normal. Under this condition, we could be sure that liquidity risk premiums could help to explain the yield curve's upward slope. The correct answer is D.
A yield curve in finance or economics is a curve that depicts the interest rate for various contract terms for a certain financial instrument ( e.g treasury bills, corporate bonds.)
The corporate yield curve will summarize the relationship between the time at which the debt will mature and the interest that is associated with it, so if we assume that it is upward sloping or normal, we can be sure that maturity risk premiums are helping to explain the upward slope of the yield curve.
The yield curve typically slopes higher, and as the maturity date approaches, so does the related interest. The reason for this is that investors demand higher interest rates for longer-term obligations, since debts issued for longer terms often carry greater risk due to the greater likelihood of inflation or a default in the long run.
With the justification provided, maturity risk premiums will aid in explaining the upward or normal slope of the current corporate bond yield curve.
Learn more about risk premium at https://brainly.com/question/29350477
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