Question: Use the table for thequestion(s) below. Suppose the term structure of interest rates is shownbelow: Term. Rate(EAR%) 1 year. 5.00% 2 years. 4.80% 3 years.

Use the table for thequestion(s) below.

Suppose the term structure of interest rates is shownbelow:

Term. Rate(EAR%)

1 year. 5.00%

2 years. 4.80%

3 years. 4.60%

5 years. 4.50%

10 years. 4.25%

20 years. 415%

What is the shape of the yield curve and what expectations are investors likely to have about future interestrates?

A.

Normal; Higher

B.

Inverted; Lower

C.

Normal; Lower

D.

Inverted; Higher

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