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7. Factors that impact the yield curve There are three Aa Aa a can factors that can affect the shape of the Treasury yield curve (r tr IPt, and MRP) and five factors that affect the shape of the corporate yield curve (t tr IPt, MRPt, DRPt, and LP The yield curve reflects the aggregation of the impacts from these factors. suppose the real risk-free rate and inflation rate are expected to remain at their current levels throughout the foreseeable future. Consider all factors that affect the yield curve. Then identify which of the following shapes that the U.S. Treasury yield curve can take. Check all that apply. Inverted yield curve Downward sloping yield curve upward-sloping yield curve Identify whether each of the following statements is true or false. Statements If inflation is expected to decrease in the future and the real rate is expected to remain steady, then the Treasury yield curve is downward sloping. (Assume MRP o.) The default risk on Walmart's short-term debt wil be higher than the default risk on its Q long-term debt. the U.S. The yield curve for a BBB-rated corporate bond is expected to be above Treasury bond yield curve. o o Yield curves of highly liquid assets will be lower than yield curves of relatively illiquid assets