SIE Exam Question 630: Answer and Explanation

Question: 630

Which of the following is/are correct regarding a flat yield curve?

(1) It generally indicates an economic slowdown.

(2) It occurs when there is little difference between short-term and long-term yields for debt instruments of the same credit quality.

• A. (1) only
• B. (2) only
• C. Both (1) and (2) are correct.
• D. Neither (1) or (2) are correct.

Correct Answer: C

Explanation:

A flat yield curve generally indicates an economic slowdown. It occurs when there is little difference between short-term and long-term yields for debt instruments of the same credit quality.