[NAVEENRAJPUT44]

HI SIR, GOOD EVENING.

Which TWO of the following statements are correct?

A.Governments can keep interest rates low by purchasing short-dated government bills in the money market
B.The normal yield curve slopes upward to reflect increasing compensation to investors for being unable to use their cash now
C.The yield on long-term loan notes is lower than the yield on short-term loan notes because long-term debt is less risky for an investor than short-term debt
D.Expectations theory states that future interest rates reflect expectations of future inflation rate movements

ACCA HUB ANSWER IS: The correct answer is A and B.

Tutorial note: If the government buys treasury bills, their market price rises and the yield (market interest rate) falls. Liquidity preference theory explains a “normal” upward sloping yield curve.

MAY YOU PLEASE GUIDE ME ON THIS QUESTION. THAK YOU

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