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If the Yield Curve Is Upward Sloping, Some Investors May

question 47

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If the yield curve is upward sloping, some investors may attempt to benefit from the higher yields on longer-term securities, even when they have funds for only a short period of time. This strategy is known as riding the yield curve.

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Definitions:

Interest Rates

Interest rates are the cost of borrowing money expressed as a percentage of the total loan amount, influencing economic activity by affecting consumer spending and investment.

Capital

The wealth in the form of money or assets, used or invested in order to generate further wealth.

Interest Income

The revenue earned from lending money or investing in interest-bearing financial instruments, such as bonds or savings accounts.

David Ricardo

A British economist known for his contributions to classical economics, especially his theory of comparative advantage in trade.

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