What Is the Shape of the Yield Curve Given the Data

question 49

Multiple Choice

What is the shape of the yield curve given the data on the three zero coupon bonds in the table below? (Assume that each bond has a face value of $1,000.) $$\begin{array} { | c | c | c | } \hline \text { Term } & \text { Price } & \text { Yield } \\\hline \text { 1 Year } & \$ 935 & 7 \% \\\hline \text { 2 Years } & \$ 882 & 6.5 \% \\\hline \text { 3 Years } & \$ 840 & 6 \% \\\hline\end{array}$$

• A)Downward sloping
• B)Upward then downward sloping
• C)Downward then upward sloping
• D)Upward sloping
• E)Flat

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