Suppose the Yield Curve Is Initially Horizontal

question 45

Multiple Choice

Suppose the yield curve is initially horizontal.Suppose the current one-year interest rate increases by 4% while the expected future one-year interest rate does not change.Which of the following will tend to occur?

• A)i2t will increase by 4%
• B)i2t will increase by 2%
• C)i2t will increase by less than 2%
• D)i2t will decrease by 2%

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Definitions:

Ethical Unethical

Pertaining to the distinction between actions or decisions that are morally right (ethical) and those that are morally wrong (unethical).

Perceptions

The process by which individuals interpret and make sense of sensory information, which can influence their behavior and decision-making.

Values

Broad beliefs about what is or is not appropriate behaviour.

Ethical Problems

Moral dilemmas or issues arising in a situation where a decision about right and wrong must be made.