Suppose the Yield Curve Is Initially Horizontal and the Current

question 63

Multiple Choice

Suppose the yield curve is initially horizontal and the current one- year interest rate increases by 2% while the expected future one- year interest rate does not change. This event will tend to cause:

• A) i2t to increase by 1%.
• B) i2t to increase by less than 1%.
• C) i2t to decrease by 2%.
• D) i2t to increase by 2%.
• E) i2t to decrease by 1%.

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Definitions:

Executive Decisions

High-level choices or judgments made by senior management in an organization, often involving strategic directions, policy formulations, and the allocation of significant resources.

Perceptual Errors

are mistakes in judgment that occur when an individual misinterprets sensory stimuli and information from the environment.

Stereotyping

Assigning fixed, generalized attributes to a group of people, often leading to prejudice and discrimination.

Discrimination

Unfair or prejudicial treatment of individuals based on certain characteristics such as race, gender, age, or sexual orientation, rather than on their merits.