Assume that the current corporate bond yield curve is upward sloping. Under this condition, of what could we be sure?

Question

Quizplus · Accepted Answer

An upward sloping yield curve implies that long-term interest rates are higher than short-term rates. This could be due to the expectation of future inflation or the presence of maturity risk premiums. Therefore, we can be sure that maturity risk premiums could help to explain the yield curve's upward slope. We cannot determine if inflation is expected to decline or if long-term bonds are a better buy than short-term bonds based solely on the shape of the yield curve. Additionally, we cannot determine the volatility of interest rates based on the shape of the yield curve.

Assume That the Current Corporate Bond Yield Curve Is Upward