Final answer:
The correct statement is option b: The yield curve for corporate bonds may be upward sloping even if the Treasury yield curve is flat.
Step-by-step explanation:
If the pure expectations theory is correct, it means that the maturity risk premium is zero. In this case, the yield curve for Treasury bonds would be flat, meaning that the yield for a 5-year T-bond would be equal to the yield for a 10-year T-bond. Therefore, option A is incorrect. The yield curve for corporate bonds can be upward sloping even if the Treasury yield curve is flat. This is because the interest rates for corporate bonds are influenced by factors such as credit risk and market conditions. So, option b is correct.
An upward-sloping Treasury yield curve indicates that the market expects interest rates to rise in the future, not decline. Therefore, option c is incorrect. There is no direct relationship between the yield curve for stocks and bonds. The yield curve for stocks can have a different slope compared to the yield curve for bonds. So, option d is incorrect.
If the maturity risk premium is zero for Treasury bonds, it does not necessarily mean that it must be negative for corporate bonds. The maturity risk premium for corporate bonds depends on various factors and can be positive, negative, or zero. So, option e is incorrect.