According to the expectations hypothesis a rising yield curve indicates that investors expect
A) future short term rates to fall
B) future short term rates to rise
C) future long term rates to rise
D) future long term rates to fall
E) none of the above

Question

Quizplus · Accepted Answer

According to the expectations hypothesis, a rising yield curve suggests that investors anticipate short-term rates to increase in the future. This is because investors would demand a higher yield on long-term bonds to compensate for the predicted rise in short-term rates.

According to the Expectations Hypothesis a Rising Yield Curve Indicates