Asked by Abigail Costiniano on Apr 24, 2024
Verified
The relationship between nominal interest rates on default-free, pure discount securities and the time to maturity is called the:
A) Liquidity effect.
B) Fisher effect.
C) Term structure of interest rates.
D) Inflation premium.
E) Interest rate risk premium.
Term Structure
The relationship between interest rates or yields and different terms or maturities for comparable debt instruments.
Interest Rates
The amount charged, expressed as a percentage, by a lender to a borrower for the use of assets.
Nominal Interest Rates
Interest rates that have not been adjusted for inflation, reflecting the rate of interest paid by borrowers or earned by investors.
- Analyze the term structure of interest rates and its impact on bond pricing and investment decisions.
Verified Answer
OH
Osama Hassan7 days ago
Final Answer :
C
Explanation :
The term structure of interest rates describes the relationship between nominal interest rates on default-free, pure discount securities and the time to maturity. It is often represented by a yield curve, which plots the interest rates of bonds having equal credit quality but differing maturity dates.
Learning Objectives
- Analyze the term structure of interest rates and its impact on bond pricing and investment decisions.