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NSM General NISM
Medium

What shift in the term structure is called if the long-term minus short-term rate moves from -2% to -1.5%?

Practice question from NISM Series IV - Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. Steepening

    Correct answer

  2. B

    Flattening

  3. C

    Parallel

  4. D

    Vertical

Why this is the answer

If the spread between long-term and short-term rates increases (from -2% to -1.5%, i.e., less negative), this is called steepening.

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