The Yield Curve Generally Slopes Upward Because

question 5

Multiple Choice

The yield curve generally slopes upward because

• A)longer maturity bonds typically pay higher interest rates than shorter maturity bonds.
• B)longer maturity bonds typically pay lower interest rates than shorter maturity bonds.
• C)shorter maturity bonds have more default risk.
• D)longer maturity bonds are not taxable.

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Definitions:

Forward Market

A type of financial market where contracts for future delivery of goods, services, or financial instruments are traded.

Discount

A reduction from the usual cost of something, often used to encourage sales or provided as an incentive for early payment.

Direct Quote

A monetary exchange rate where the domestic currency is quoted per each unit of a currency from another country.

Canadian Dollar

The currency of Canada, symbolized as CAD and often represented by the dollar sign $ or C$ to differentiate it from other dollar-denominated currencies.