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Factors that impact the yield curve There are two factors that can affect the shape of the government bond yield curve ( r * *
Factors that impact the yield curve
There are two factors that can affect the shape of the government bond yield curve and IP and five factors that can affect the shape of the
corporate bond yield curve and : The yield curve reflects the aggregation of the impacts from these factors.
Suppose the real riskfree 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 the government bond yield curve can take. Check all that apply.
Upwardsloping yield curve
Inverted yield curve
Downwardsloping 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 government bond yield
curve is downward sloping. Assume MRP
The default risk on Canadian Tire's shortterm debt will be higher than the default risk on its longterm debt.
The yield curve for an AArated corporate bond is expected to be above the government bond yield curve.
Yield curves of highly liquid assets will be lower than yield curves of relatively less liquid assets.
A government bond yield curve is plotted on the following graph:
Based on an upwardsloping normal yield curve as shown, which of the following statements is correct?
Inflation must be expected to increase in the future.
Pure expectations theory must be correct.
If the pure expectations theory is correct, future shortterm rates are expected to be higher than current shortterm rates.
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