The Term Structure of Interest Rates Predicts That Long-Term Interest

question 28

Multiple Choice

The term structure of interest rates predicts that long-term interest rates will exceed short-term interest rates,resulting in an upward sloping yield curve. If Central Banks were to intervene in the financial market to "flatten" the shape of the yield curve,they would attempt this by

• A) purchasing long-term bonds.
• B) selling long-term bonds.
• C) purchasing short-term bonds.
• D) selling short-term bonds.