What Happens to the Shape of the Yield Curve If

question 62

Multiple Choice

What happens to the shape of the yield curve if expectations about future interest rates change such that future short term interest rates are expected to be lower than previously expected?

• A)the slope (shape) of the yield curve remains the same but the curve shifts down.
• B)the differences among various yield curves narrows.
• C)If positively sloped, the yield curve becomes flatter; if negatively sloped, the yield curve becomes more negatively sloped.
• D)Both a and b are correct.

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