Question

What is the shape of the yield curve given in the following term​ structure? What expectations are investors likely to have about future interest​ rates?

Answer 1

1.The shape of the yield curve is a normal yield curve​(increasing).

2.The expectation that the investors are likely to have about future interest​ rates is that the interest rates may raise in future

Step-by-step explanation:

1. The shape of the yield curve is a normal yield curve​(increasing) and it is called normal yield curve in which the given table had EAR increasing with duration.

Normal yield curve can be seen as either a upward sloping or a curve that has a positive slope in which we have lower interest rates for short term debts as well as higher interest rate for long term debts,

2. The expectation that the investors are likely to have about future interest​ rates is that the interest rates may raise in future because from a normal yield curve the future expectation on the interest rates is increasing while For a inverted yield curve the future expectation on interest rates is decreasing.