Question

Which of the following statement is most FALSE?

A. Investment grade bonds are rated BBB or higher by Standard & poor's

b. bond markets are primarily OTC transactions

c. B/c interest rates tend to fall in response to an economic slow down, an inverted yield curve is often interpreted as a negative forecast for economic growth

d. inverted yield curves tend to follow recessions

e. the yield curve tends to be sharply increasing as the economy comes out of a recession and interest rates are expected to rise.

Answer 1

Which of the following statement is most FALSE?

a. Investment grade bonds are rated BBB or higher by Standard & poor's

This statement is true as investment grade bonds are rated by Standard & poor's are AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB and BBB-. Below that the bonds are of non-investment grades

b. bond markets are primarily OTC transactions

This statement is true as bond markets are primarily traded over the counter (OTC) mainly due to the diversity of bonds available.

c. B/c interest rates tend to fall in response to an economic slowdown; an inverted yield curve is often interpreted as a negative forecast for economic growth

This statement is true because interest rates tend to fall in response to an economic slowdown; an inverted yield curve is often interpreted as a negative forecast for economic growth.

d. inverted yield curves tend to follow recessions

This statement is false as inverted yield curves tend to precede recessions.

e. the yield curve tends to be sharply increasing as the economy comes out of a recession and interest rates are expected to rise.

This statement is true as the yield curve tends to be sharply increasing as the economy comes out of a recession and interest rates are expected to rise

Therefore most false statement is option d. inverted yield curves tend to follow recessions