C

D

The correct yield curve is

b$.$ What type of yield curve is shown? b$.$ What type of yield curve is shown?

c$.$ What information does this graph tell you

Select$-$

d$.$ Based on this yield curve, if you needed to borrow money for longer than $1$ year, would it make sense for you to borrow short term and renew the loan or borrow long

term? Explain.

I. Even though the borrower reinvests in increasing short$-$term rates, those rates are still below the long$-$term rate, but what makes the higher long$-$term rate attractive

is the rollover risk that may possibly occur if the short$-$term rates go even higher than the long$-$term rate $($and that could be for a long time!$).$

II$.$ Generally, it would make sense to borrow short$-$term because each year the loan is renewed the interest rate would be higher.

III. Generally, it would make sense to borrow short$-$term because each year the loan is renewed the interest rate would be lower.

IV$.$ Generally, it would make sense to borrow long$-$term because each year the loan is renewed the interest rate would be lower.

V$.$ Differences in yields that may exist between the short$-$term and long$-$term cannot be explained by the forces of supply and demand in each market.Assume that yields on U$.$S$.$ Treasury securities were as follows:

a$.$ Select a correct yield curve based on these data.