Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Interest Yield Curve flatten = interest rate decrease
- This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.
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- June 3, 2016 at 1:50 pm #319133
May I know the reason of why interest rate decrease earlier than it thought will caused the interest yield curve to be flatten instead of increase or steepen ?
June 3, 2016 at 4:43 pm #319168I am not sure I understand what you are asking.
The yield curve normally slopes upwards because usually the interest rate is usually higher the longer the period of the loan or deposit. The higher the interest rates are for longer periods then the steeper the curve will be, and the lower the interest rates are for longer period then the less steep the curve.
June 4, 2016 at 12:46 am #319215i founded this question in BPP revision kit.
“which causes the interest yield curve to be steepen?
1. increased uncertainty about the future
2. Hightened expectations of the increase in interest rate
3. The expectation of decreses in interest rate happen earlier than previously thought. “June 4, 2016 at 10:00 am #319274It is as I replied previously.
(There is an explanation of the yield curve in the second chapter of our free lecture notes)
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