Which of the following statements pertaining to the yield curve is not true?
A) Yield curves usually slope upwards.
B) The yield curve shows the difference in default risk between securities.
C) The yield curve shows the relationship among bonds with the same risk characteristics but different maturities.
D) The yield curve can be flat or downward sloping depending on market conditions.

Question

Quizplus · Accepted Answer

The yield curve does not directly show the difference in default risk between securities. Instead, it shows the relationship between bonds with different maturities, which can indirectly reflect differences in default risk. Default risk is usually reflected in credit spreads, which can be compared across securities.

Which of the Following Statements Pertaining to the Yield Curve