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​Assume that annualized yields of short-term and long-term securities are equal. If investors suddenly believe interest...

​Assume that annualized yields of short-term and long-term securities are equal. If investors suddenly believe interest rates will increase, their actions may cause the yield curve to

Group of answer choices

a.​be unaffected.

​b.become flat.

​c.become upward sloping.

​d.become inverted.

Solutions

Expert Solution

If the annulized yields of short term and long term securities are equal, any increase in interest rates , the yield curve also becomes upward sloping due to increase and any corresponding decrease in interest rates would invert the yield curve.

Answer is ​c.become upward sloping.

jeff jeffy answered 2 years ago
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