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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › mock exam
Dear tutor, I am confusing this question, which of following statement are correct?
when interest rates are expected to fall, the yield curve could be sloping downwards.
this sentence was chosen to be not correct, but in past paper one discuss question: mention about expectation theory saying that this theory suggests that the relationship between short-term and long term interest rates can be explained by expectations regarding interest rate movements. where future interest rates are expected to rise compared to short-term interest rates, the yield curve will slope upwards. where future interest rates are expected to fall compared to short-term interest rates, the yield curve will slope downwards.
I do not know which mock exam you are asking about.
If interest rates are expected to fall then the yield curve will slope downwards.
In our mock exam, this statement is marked as being correct in one of the questions.