Question:Examine the validity of the following statements with respect to the yield curve showing the term structure of interest rates.
Statement 1
When interest rates are expected to fall consistently, short-term interest rates are likely to be higher than long-term interest rates.
Statement 2
When interest rates are expected to fall consistently, a yield curve would normally be downward sloping.
A. False True
B. True True
C. False False
D. True False
The correct answer is: Both statements are True.