Assume That a Yield Curve Is Influenced by Interest Rate

question 11

Multiple Choice

Assume that a yield curve is influenced by interest rate expectations and a liquidity premium. Assume the yield curve is initially flat. If liquidity suddenly was no longer important, the yield curve would now have a ____ (assuming no other changes) .

• A)slight downward slope
• B)slight upward slope
• C)steep upward slope
• D)steep downward slope

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Definitions:

Long-Term Equipment Lease

An agreement where a physical asset is rented for a longer duration, often exceeding one year, allowing the use of the asset without purchasing it.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance, remaining constant over a period.

Per Unit Basis

A method of quantifying costs, revenues, or other financial metrics on the basis of a single unit of production or service.

Activity

A specific task or action that is part of a process or contributes to the completion of a project.