Asked by Wendy Bartley on May 25, 2024
Verified
The yield curve is:
A) inverted when short-term rates are higher than long-term rates.
B) normal when it slopes upward to the right.
C) a plot of interest rates versus term, also called the term structure of interest rates.
D) All of the above
Yield Curve
A graph showing the relationship between bond yields and maturities, commonly used to gauge future interest rate changes.
Term Structure
The relationship between the interest rates (or yields) and the maturities of debt securities such as bonds.
Interest Rates
The percentage of a sum of money charged for its use, indicating the cost of borrowing money or the return on invested funds.
- Define the term structure of interest rates and detail the multiple appearances of the yield curve.
- Describe the factors that influence the term structure of interest rates and the formation of yield curves.
Verified Answer
RC
Raiza CabreraMay 27, 2024
Final Answer :
D
Explanation :
A) The yield curve is inverted when short-term rates are higher than long-term rates.
B) The yield curve is normal when it slopes upward to the right.
C) The yield curve is a plot of interest rates versus term, also called the term structure of interest rates. Therefore, all of the above options are correct.
B) The yield curve is normal when it slopes upward to the right.
C) The yield curve is a plot of interest rates versus term, also called the term structure of interest rates. Therefore, all of the above options are correct.
Learning Objectives
- Define the term structure of interest rates and detail the multiple appearances of the yield curve.
- Describe the factors that influence the term structure of interest rates and the formation of yield curves.