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:

Cremasteric Reflex

A reflex action that results in the drawing up of the testicles and scrotum when the inner thigh is stroked, indicative of normal testicular function.

Uncircumcised Infant

A male infant who has not undergone circumcision, a procedure where the foreskin covering the head of the penis is removed.

Foreskin

The fold of skin that covers the head of the penis, which can be retracted.

Genital Warts

Viral infections manifesting as small, cauliflower-like lesions on the genital or anal areas, associated with HPV.