5. Factors that impact the yield curve

There are three factors that can affect the shape of the Treasury yield curve (r*t, IPt, and MRP) and five factors that can affect the shape of the

corporate yield curve (r*t, IPt, MRP, DRPt, and LPt). The yield curve reflects the aggregation of the impacts from these factors.

Suppose the real risk-free rate and inflation rate are expected to remain at their current levels throughout the foreseeable future. Consider all factors

that affect the yield curve. Then identify which of the following shapes that the US Treasury yield curve can take. Check all that apply.

O Inverted yield curve

Upward-sloping yield curve

Downward-sloping yield curve