Use the Following Figure to Answer the Question

question 38

Multiple Choice

Use the following figure to answer the question :

-The steeply upward sloping yield curve in the figure above indicates that

• A)short-term interest rates are expected to rise in the future.
• B)short-term interest rates are expected to fall moderately in the future.
• C)short-term interest rates are expected to fall sharply in the future.
• D)short-term interest rates are expected to remain unchanged in the future.

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Definitions:

Compound Interest

The process of calculating interest not only on the principal amount but also on accumulated interest from earlier time frames of a deposit or loan.

Capital Investment

Funds spent by a firm to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

Net Cash Flows

The difference between a company's cash inflows and cash outflows within a specific period.

Net Present Value

A method of evaluating investment opportunities that calculates the difference between the present value of cash inflows and outflows over a period of time.