What is the shape of the yield curve given in the following term structure? What expectations are investors likely to have about future interest rates? (Click on the following icon in order to copy its contents into a spreadsheet.) Term Rate (EAR, %) 1 year 1.99 2 years 2.39 3 years 2.76 5 years 3.35 7 years 3.77 What is the shape of the yield curve given the term structure? (Select the best choice below.) OA. The yield curve is a flat yield curve. OB. The yield curve is a normal yield curve (increasing). OC. It is hard to tell because we are not given an EAR for every year. OD. The yield curve is an inverted yield curve (decreasing). 10 years 4.14 20 years 4.94
What is the shape of the yield curve given in the following term structure? What expectations are investors likely to have about future interest rates? (Click on the following icon in order to copy its contents into a spreadsheet.) Term Rate (EAR, %) 1 year 1.99 2 years 2.39 3 years 2.76 5 years 3.35 7 years 3.77 What is the shape of the yield curve given the term structure? (Select the best choice below.) OA. The yield curve is a flat yield curve. OB. The yield curve is a normal yield curve (increasing). OC. It is hard to tell because we are not given an EAR for every year. OD. The yield curve is an inverted yield curve (decreasing). 10 years 4.14 20 years 4.94
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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What is the shape of the yield curve given in the following term structure? What expectations are investors likely to have
about future interest rates?
(Click on the following icon in order to copy its contents into a spreadsheet.)
Term
Rate (EAR, %)
%
calculator Ask my instructor
5
1 year
1.99
2 years
2.39
Search or enter website name
6
What is the shape of the yield curve given the term structure? (Select the best choice below.)
OA. The yield curve is a flat yield curve.
OB. The yield curve is a normal yield curve (increasing).
OC. It is hard to tell because we are not given an EAR for every year.
O D. The yield curve is an inverted yield curve (decreasing).
3 years
2.76
MacBook Pro
5 years
3.35
&
7 years
3.77
Clear all
S
(
BAHBABY
7
8
9
19
10 years
4.14
20 years
4.94
Check answer
0
Expert Solution
Step 1
Yield curve can be increasing (upward sloping ) , decreasing (downward sloping ) and flat (horizontal ).
Upward sloping = Increase in interest rate with the increase in the no. of years.
Downward sloping = Decrease in interest rate with the increase in no. of years.
Horizontal sloping = No change in interest rate with the increase in no. of years.
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