When the Yield Curve Is Upward-Sloping, Then

question 117

Multiple Choice

When the yield curve is upward-sloping, then:

• A)Short-maturity bonds offer high coupon rates
• B)Long-maturity bonds are priced above par value
• C)Short-maturity bonds yield less than long-maturity bonds
• D)Long-maturity bonds increase in price when interest rates increase

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Definitions:

Marginal Product

The incremental increase in output resulting from the use of one additional unit of a resource, while keeping other resources constant.

Variable Resource

A factor of production whose quantity can easily be changed in the short term to increase or decrease production levels.

Fixed Resource

An asset or resource in production that cannot be easily increased or decreased in the short term, such as land or machinery.

Diminishing Returns

The principle that says as more of a variable input is added to a fixed input, the incremental gain in output will eventually decrease.