What Does an Upward-Sloping Yield Curve Imply, According to the Expectations

question 23

Multiple Choice

What does an upward-sloping yield curve imply, according to the expectations theory of the term structure of interest rates?

• A)Investors expect long-term interest rates to fall in the future.
• B)Investors expect future short-term interest rates to be lower than the current short-term interest rate.
• C)Investors expect future short-term interest rates to be the same as the current short-term interest rate.
• D)Investors expect future short-term interest rates to be higher than the current short-term interest rate.

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Definitions:

Company Tax Rate

The percentage of its profits an organization is required to pay to the government as tax.

Tax Deductible

Expenses that can be subtracted from gross income to reduce the taxable income.

Warranty Liability

An obligation reported on a company's balance sheet that represents the estimated costs of fulfilling the terms of warranties offered on products sold.

Deferred Tax

The amount of income tax payable/recoverable in future reporting periods in respect of temporary differences and tax losses.