Question

The real risk-free rate of interest is expected to remain contastantat 3% for teh foreseeable futre.However, inflation is expected to steadyily increase over the next 20 years,so the Treasury yield curve is upsloping. Assume that the expectationstheory holds. You are considering two corporate bonds .THat is ,a 5-year corporate bomd and a 10 -year corporate bond,each of whichhas the same default risk and iquidity risk.given this information,which of the following statements is most correct? A- S ince the expectations theory holds,this implies thta 10-year Treasury bonds must have the same ield as 5-yaer Treasury bonds,B- Since teh expectations theory holds,this implies that teh 10-year corporate bonds must have teh same yield as teh 5- year corporate bonds,C Since the expectations theory holds,this implies that 10-year corporate bonds must have the same yield as 10-year Treasury bonds,D-The 10- year Treasury bond must have a higher yield than the 5-year corporate bond,E The 10-year corporate bond must have a higher yield than the 5-year corporate bonds. PLEASE SHOW TEH WORK ON HOW YOU GOT YOUR ANSWER SO I UNDERSTAND THIS. Thanks