If one-period forward rates are decreasing with maturity, the yield curve is most likely:
A) flat.
B) upward sloping.
C) downward sloping.

Question

Quizplus · Accepted Answer

Decreasing one-period forward rates indicate that the market expects future interest rates to be lower. This suggests that the yield curve is downward sloping, as longer-term bonds are expected to have lower yields than shorter-term bonds.

If One-Period Forward Rates Are Decreasing with Maturity, the Yield