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yield curve reflects higher expected future rates of interest. a) An upward sloping (or "normal") b) A flat c) A downward sloping d) An inverted

yield curve reflects higher expected future rates of interest. a) An upward sloping (or "normal") b) A flat c) A downward sloping d) An inverted

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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______________ yield curve reflects higher expected future rates of interest.    

### Multiple Choice Question **Question:** ____________ yield curve reflects higher expected future rates of interest. **Options:** a) An upward sloping (or “normal”) b) A flat c) A downward sloping d) An inverted **Explanation:** In the context of finance and economics, a yield curve is a graph that shows the relationship between interest rates and the maturity dates of debt securities (such as bonds) from the same issuer. The shape of the yield curve can provide insights into future interest rate changes and economic activity. Here are the descriptions of the different types of yield curves mentioned: - **Upward Sloping (or “Normal”) Yield Curve:** Typically indicates that investors expect future interest rates to be higher. Longer-term securities have higher yields compared to shorter-term ones. - **Flat Yield Curve:** Suggests that investors expect future interest rates to remain fairly stable. Yields are roughly the same across different maturities. - **Downward Sloping Yield Curve:** Often signals expectations of declining future interest rates. This can occur in anticipation of economic slowdown or recession. - **Inverted Yield Curve:** Indicates that investors expect future interest rates to decrease significantly. Short-term securities have higher yields than long-term ones, which is often viewed as a predictor of economic recession. In this question, the correct answer choice should reflect the statement about higher expected future rates of interest. Select the appropriate option to test your understanding of yield curves and interest rate expectations.
Transcribed Image Text:### Multiple Choice Question **Question:** ____________ yield curve reflects higher expected future rates of interest. **Options:** a) An upward sloping (or “normal”) b) A flat c) A downward sloping d) An inverted **Explanation:** In the context of finance and economics, a yield curve is a graph that shows the relationship between interest rates and the maturity dates of debt securities (such as bonds) from the same issuer. The shape of the yield curve can provide insights into future interest rate changes and economic activity. Here are the descriptions of the different types of yield curves mentioned: - **Upward Sloping (or “Normal”) Yield Curve:** Typically indicates that investors expect future interest rates to be higher. Longer-term securities have higher yields compared to shorter-term ones. - **Flat Yield Curve:** Suggests that investors expect future interest rates to remain fairly stable. Yields are roughly the same across different maturities. - **Downward Sloping Yield Curve:** Often signals expectations of declining future interest rates. This can occur in anticipation of economic slowdown or recession. - **Inverted Yield Curve:** Indicates that investors expect future interest rates to decrease significantly. Short-term securities have higher yields than long-term ones, which is often viewed as a predictor of economic recession. In this question, the correct answer choice should reflect the statement about higher expected future rates of interest. Select the appropriate option to test your understanding of yield curves and interest rate expectations.
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