Assume That the Current Yield Curve Is Upward Sloping,or Normal

question 32

Multiple Choice

Assume that the current yield curve is upward sloping,or normal.This implies that

• A) Short-term interest rates are more volatile than long-term rates.
• B) Inflation is expected to subside in the future.
• C) The economy is at the peak of a business cycle.
• D) Long-term bonds are a better buy than short-term bonds.
• E) None of the above statements is necessarily implied by the yield curve given.

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Definitions:

Permanent Accounts

Accounts that carry their ending balances over to the next fiscal year, including asset, liability, and equity accounts, foundational for understanding a company's financial health.

Balance Sheet

A financial statement that displays a company's financial position at a specific point in time, listing assets, liabilities, and equity.

Final Entries

The journal entries recorded at the end of an accounting period to prepare accounts for the next period or for the preparation of financial statements.

Temporary Accounts

Accounts used to collect information during a specific accounting period and are closed at its end, such as revenues, expenses, and dividends accounts.