Which of the following statements is CORRECT about a yield curve? a. A yield curve reflects the relationship between bond yields and the inflation rate. b. A humped yield curve reflects interest rates lower than short term maturities. c. A normal yield curve is generally humped. d. An upward sloping yield curve is referred to as abnormal or inverted. e. A downward sloping yield curve is referred to as abnormal or inverted

An upward sloping yield curve is referred to as abnormal or inverted.d. An upward sloping yield curve is referred to as abnormal or inverted. Explanation An upward sloping yield curve is referred to as abnormal or inverted. A humped yield curve reflects interest rates lower than short term maturities. Yield curve is a graphical representation of the relationship between bond yield and the time to maturity of the bond. The yield curve is used by investors to predict future interest rates. The most common types of yield curves are: Normal yield curve: This is the most common type of yield curve, and it shows that longer-term bonds have higher yields than shorter-term bonds. Inverted yield curve: This type of yield curve is less common, and it occurs when shorter-term bonds have higher yields than longer-term bonds. An inverted yield curve is often seen as a sign of economic recession. Abnormal yield curve: An abnormal yield curve is one that does not fit into either the normal or inverted category.

Question

In: Accounting

Which of the following statements is CORRECT about a yield curve?

a. A yield curve reflects the relationship between bond yields and the inflation rate.

b. A humped yield curve reflects interest rates lower than short term maturities.

c. A normal yield curve is generally humped.

d. An upward sloping yield curve is referred to as abnormal or inverted.

e. A downward sloping yield curve is referred to as abnormal or inverted

Expert Solution

d. An upward sloping yield curve is referred to as abnormal or inverted.

Explanation
An upward sloping yield curve is referred to as abnormal or inverted. A humped yield curve reflects interest rates lower than short term maturities.

Yield curve is a graphical representation of the relationship between bond yield and the time to maturity of the bond. The yield curve is used by investors to predict future interest rates.

The most common types of yield curves are:

Normal yield curve: This is the most common type of yield curve, and it shows that longer-term bonds have higher yields than shorter-term bonds.

Inverted yield curve: This type of yield curve is less common, and it occurs when shorter-term bonds have higher yields than longer-term bonds. An inverted yield curve is often seen as a sign of economic recession.

Abnormal yield curve: An abnormal yield curve is one that does not fit into either the normal or inverted category.

An upward sloping yield curve is referred to as abnormal or inverted.

Junaid answered 1 year ago

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