Question: Please mark the only INCORRECT sentence about the term structure of interest rates (the yield curve) a. If there is no liquidity risk premium and
Please mark the only INCORRECT sentence about the term structure of interest rates (the yield curve)
| a. | If there is no liquidity risk premium and traders expect the Fed to keep Fed Funds unchanged for years to come, then the yield curve is likely to be flat | |
| b. | A zero coupon bond is equal to the sum of several coupon bonds of the same yield and the same maturity | |
| c. | If traders expect that the US economy will start growing quickly in 2021, raising employment, wages and inflation, then they would expect the yield curve to steepen | |
| d. | A downward sloping yield curve is a market indicator of a recession, because traders are pricing that it will require the Fed to cut interest rates vigorously in coming years. |
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