Yield Curve and Bond Rating Quiz

1. What does an inverted yield curve typically indicate?

a) Economic growth
b) Economic recession
c) Inflation rise

2. What does it mean if the yield curve flattens?

a) Inflation is high
b) There's little difference between short and long-term rates
c) Interest rates will rise sharply

3. What is a steepening yield curve a sign of?

a) Economic growth
b) Economic slowdown
c) No change in the economy

4. What can cause a sharp rise in long-term interest rates?

a) Inflation expectations
b) Lower economic growth
c) Falling stock prices

5. What does a 'AAA' bond rating signify?

a) The bond has a high risk of default
b) The bond is considered extremely safe with a low risk of default
c) The bond is speculative and risky

6. What does a 'BBB' bond rating suggest?

a) The bond is speculative with a higher risk of default
b) The bond is of investment grade but has moderate risk
c) The bond is high risk and near junk status

7. What does a steep upward-sloping yield curve indicate?

a) Expectation of future interest rate hikes
b) Expectation of future interest rate cuts
c) No changes in interest rates expected

8. What does a 'C' bond rating represent?

a) The bond is investment grade
b) The bond is speculative but safe
c) The bond is extremely risky and near default

9. Which part of the yield curve is most influenced by central bank policy?

a) The short end (1 month to 2 years)
b) The middle section (3 to 10 years)
c) The long end (20 to 30 years)

10. Which economic indicator most influences bond ratings?

a) Interest rates
b) Inflation
c) Creditworthiness of the issuer