CFA Practice Question

There are 136 practice questions for this study session.

CFA Practice Question

During a recession the slope of the yield curve for default-free government bonds is most likely to steepen. This is because ______
A. the short rates will be lower
B. the long rates will be higher
C. This statement is wrong. The slope of the yield curve will most likely flatten during a recession.
Explanation: A central bank will tend to lower its short-term policy rate during a recession. The impact of monetary policy on longer-term rates will not be as strong as that on short-term rates, because the central bank is expected to bring short-term rates back to normal as the recession recedes.

User Contributed Comments 0

You need to log in first to add your comment.