What is the shape of the yield curve given in the following term structure? What expectations are investors likely to have about future interest rates?

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Term	1 year	2 years	3 years	5 years	7 years	10 years	20 years
Rate (EAR, %)	1.97	2.39	2.74	3.33	3.78	4.14	4.96

1. What is the shape of the yield curve given the term structure?(Select the best choice below.)

A.

The yield curve is an inverted yield curve (decreasing).

B.

It is hard to tell because we are not given an EAR for every year.

C.

The yield curve is a normal yield curve (increasing).

D.

The yield curve is a flat yield curve.

2. What expectations are investors likely to have about future interest rates?(Select the best choice below.)

A.

The yield curve provides no clues as to future interest rate levels.

B.

Interest rates might rise in the future.

C.

Interest rates might decrease in the future.

D.

Interest rates will likely stay the same in the future.