Which of the following statements is not true? O A. Interest rates on bonds of d

Question

Which of the following statements is not true? O A. Interest rates on bonds of different maturities tend to move together over time O B. Yield curves almost always slope upward. C. when short-term interest rates are high, yield curves tend to be downward sloping. O D. When short-term interest rates are low, yield curves tend to be inverted. According to the segmented markets theory of the term structure of interest rates, if bondholders prefer short-term bonds to long-term bonds, the yield curve will be downward sloping upward sloping vertical

Explanation / Answer

1. Statement (D) is incorrect i.e the statement "When short-term interest rates are low, yield curves tend to be inverted" is incorrect. Hence the answer is the option (D).

2. According to the segmented markets theory of the term structure of interest rates, if bondholders prefer short-term bonds to long-term bonds, the yield curve will be upward sloping.

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