Which of the following statements is CORRECT?
A) The higher the maturity risk premium, the higher the probability that the yield curve will be inverted.
B) The most likely explanation for an inverted yield curve is that
Investors expect inflation to increase.
C) The most likely explanation for an inverted yield curve is that
Investors expect inflation to decrease.
D) If the yield curve is inverted, short-term bonds have lower yields
Than long-term bonds.
E) Inverted yield curves can exist for Treasury bonds, but because of default premiums, the corporate yield curve can never be inverted.

Question

Quizplus · Accepted Answer

An inverted yield curve typically suggests that investors expect future inflation to decrease, leading to lower interest rates in the future.

Which of the Following Statements Is CORRECT