The Term Structure of Interest Rates

question 30

Multiple Choice

The term structure of interest rates:

• A)plots coupons versus time to maturity.
• B)describes how interest rates vary over coupons.
• C)ranks security yield according to the default risk structure.
• D)describes the relationship between maturity and yield for similar securities.

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Definitions:

Population Proportion

The ratio or fraction of members in a population that have a particular characteristic, often denoted by P.

Sample Proportion

The fraction of the sample that displays a certain property or characteristic.

Null Hypothesis

The null hypothesis is a statement used in statistical testing that proposes there is no significant difference or effect, serving as the default assumption to be tested against.

Level of Significance

The threshold below which a p-value is considered statistically significant, typically set at 0.05 or 5%, indicating the probability of rejecting the null hypothesis when it is true.