Use the Table for the Question(s) Below

question 110

Multiple Choice

Use the table for the question(s) below.
Suppose the term structure of interest rates is shown below:

-What is the shape of the yield curve and what expectations are investors likely to have about future interest rates?

• A) inverted; higher
• B) normal; higher
• C) inverted; lower
• D) normal; lower

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Definitions:

U.S. Government Securities

Financial instruments issued by the U.S. Department of the Treasury or other federal government agencies to finance federal spending, including Treasury bonds, notes, and bills.

Bank Reserves

The amounts of funds that a bank holds in its reserve account with the central bank or as cash in vault, to meet any sudden withdrawals.

Market Rate

The prevailing price or interest rate at which goods, services, or securities are bought and sold in a competitive marketplace.

Independence

Independence is the condition of a nation, country, or state which exercises self-governance, and sovereignty, over its territory.