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4. If the \"risk free rate\" & the various \"market premiums\" (eg: default/cred

ID: 2794178 • Letter: 4

Question

4. If the "risk free rate" & the various "market premiums" (eg: default/credit, liquidity, inflation, market, & maturity) are expected to gradually increase over the next 3-5 years, the "slope of the Yield Curve" will be A. upward (or positively sloping or a "normal Yield Curve")... inflation B. flat (no slo C. downward (or negatively sloping or an "inverted Yield Curve")... default/credit D. upward (for years 1-3) then downward (for years 3-5). market sloping. Which of the "market premiums" is most important pe at all.. .no change would be expected).. liquidity

Explanation / Answer

If the "risk-free rate" and the various "market premium" are expected to gradually increase over the next 3-5 years, the "slope of the yield curve" will be upward sloping. which of the "market premium" is most important: "inflation"

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