In general,a downward-sloping term structure implies that investors expect future short-term interest rates to:
A)decrease.
B)increase.
C)be the same as the current rate.
D)none of the options given.

Question

Quizplus · Accepted Answer

When the term structure is downward-sloping, the yield curve suggests that investors expect future short-term interest rates to decrease. This is because the current short-term interest rate is already high compared to expected future rates, causing investors to expect a decline in interest rates in the future.

In General,a Downward-Sloping Term Structure Implies That Investors Expect Future