There are three factors that can affect the shape of the Treasury yield curve (r*t, IP, and MRP) and five factors that can affect the shape of the corporate yield curve (r*t, 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. Which of the following shapes can the U.S. Treasury yield curve 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 The yield curve for a AA-rated corporate bond is expected to be above the U.S. Treasury bond yield curve. All else equal, the yield on new bonds issued by a leveraged firm will be less than the yield on the new bonds issued by an unleveraged firm. Yield curves of highly liquid assets will be lower than yield curves of relatively illiquid assets. A U.S. Treasury yield curve is plotted in the following graph: INTEREST RATE (%) True False