1. What is the shape of the yield curve given in the following term? structure? What expectations are investors likely to have about future interest? rates? Term 1 year 2 years 3 years 5 years 7 years 10 years 20 years Rate? (%) 1.99 2.43 2.71 3.34 3.77 4.16 4.93 What is the shape of the yield curve given the term? structure?
A. The yield curve is a normal yield curve? (increasing).
B. It is hard to tell because we are not given an EAR for every year.
C. The yield curve is a flat yield curve.
D. The yield curve is an inverted yield curve? (decreasing).
2. What expectations are investors likely to have about future interest? rates?
A. Interest rates might rise in the future.
B. Interest rates will likely stay the same in the future.
C. Interest rates might decrease in the future.
D. The yield curve provides no clues as to future interest rate levels. Click to select your answer.