The Normal Yield Curve Is Upward Sloping Implying That

question 5

Multiple Choice

The normal yield curve is upward sloping implying that

• A)the return on short-term securities are higher than the return on long-term securities of similar risk.
• B)the return on long-term securities are equal to the return on short-term securities of similar risk.
• C)the return on short-term securities are lower than the return on long-term securities of similar risk.
• D)the return on bonds with a higher default risk is higher than the returns on bonds with lower default risk.
• E)the return on bonds with a lower default risk is higher than the returns on bonds with higher default risk.

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Definitions:

Normal Good

A type of good whose demand increases when consumer income rises, and falls when consumer income decreases.

Price-elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with elasticity typically differing among products.

Cocaine

A powerful stimulant drug derived from the leaves of the coca plant, commonly used recreationally and noted for its potent effects and potential for addiction.

Elastic

A term describing the sensitivity of demand or supply to changes in price or other factors.