Which of the following statements is correct? Group of answer choices A steepening of the yield curve could reflect a belief that the central bank will in the future conduct a more restrictive monetary policy than previously thought. The yield curve reflects the relationship between existing short, medium and longer term interest rates, independent of expectations about future interest rates. The yield curve reflects the effect of arbitrage in financial markets not what the current interest rate is in the overnight market. A steepening of the yield curve could reflect long-term government bonds suddenly being seen as a more attractive investment.

Which of the following statements is correct?Group of answer choicesAn increase in the Reserve Bank’s target cash rate would leave all other interest rates unchanged if the slope of the yield curve is unchanged.The yield curve could change its slope without current monetary policy changing.A change in the prices of long-term bonds independently of views about future monetary policy would change the position of the yield curve, but not its slope even if current monetary policy is unchanged.A restrictive monetary policy now even if it generates expectations of a more expansionary monetary policy in the future would necessarily reduce all interest rates now.

Which of the following statements is FALSE? A) The shape of the yield curve will be strongly influenced by interest rate expectations. B) We can use the term structure to compute the present and future values of a risk-free cash flow over different investment horizons. C) It is important to use a discount rate that matches both the horizon and the risk of the cash flows. D) The yield curve tends to be inverted as the economy comes out of a recession. E) None of the above is false.

Which of the following items will likely not affect the shape of the yield curve?Group of answer choicesMore efficient transaction systems of financial assetsThe market experiencing increasing concerns about the financial health of the economyAn sudden increase in demand for long-term bondsThe market forming a more optimistic outlook of the future of the economy

At any time, the slope of the yield curve is affected by:Select one:a.inflationary expectations.b.liquidity preferences.c.the comparative equilibrium of supply and demand in the short-term and long-term market segments.d.Both a and c are correct.e.All a, b and c are correct.

A ________ yield curve predicts a future increase in inflation.A) steeply upward slopingB) slight upward slopingC) flatD) downward sloping