State whether you agree or disagree with the statement below. Explain you answer. "Assuming no liquidity...
State whether you agree or disagree with the statement below. Explain you answer.
"Assuming no liquidity premium, no maturity preferences, no default risk, and no changes in the expected real rate of return, an upward sloping yield curve implies that investors expect inflation to increase in the future."
(Maximum 3 sentences, maximum 100 words.)
Homework Answers
An upward slope yield curve means that long-term interest rates are higher than short-term interest rates. Under the assumption that there is no liquidity premium, no expiry preference, no default risk and no change in the expected real rate of return, the only factor influencing interest rates is expected inflation.
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State whether you agree or disagree with the statement below.
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