If the Yield Curve Slope Is Flat for Short Maturities

question 30

Multiple Choice

If the yield curve slope is flat for short maturities and then slopes steeply upward for longer maturities,the liquidity premium theory (assuming a mild preference for shorter-term bonds) indicates that the market is predicting

• A)a rise in short-term interest rates in the near future and a decline further out in the future.
• B)constant short-term interest rates in the near future and further out in the future.
• C)a decline in short-term interest rates in the near future and a rise further out in the future.
• D)constant short-term interest rates in the near future and a decline further out in the future.

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Definitions:

Random Sample

A random sample is a method of selecting a subset of individuals from a statistical population, where each individual has an equal chance of being chosen, ensuring representation.

Convenience Sample

A sampling method where participants are selected based on their easy availability and proximity to the researcher.

Representative Sample

A subset of a population that accurately reflects the members of the entire population, used in statistical analysis.

Experimenter Bias

A form of bias introduced by the experimenter's expectations or personal beliefs affecting the outcome of research.