Starting with a flat yield curve and holding all else constant, what will the shape of the yield curve be if investors prefer to invest in long term treasury securities relative to short-term Treasury Securities? A. Slightly upward sloping B. Downward sloping C. Steeply upward sloping D. Flat
B
A?? As per the Market segmentation thoery - Dinesh S
B
B,
B for life… cause B is just too sweeeeet!
Could someone please explain why it is B please?
B because people prefer long maturity and hence the demand would puch the price of the long maturity bond higher compared to the shorter maturity. Price has an inverse relation with yield so th eyield will fall…hence downward sloping
damm… , I think It’s high time I need to start revising what book-5 had to offer - Dinesh S