Assume that the current corporate bond yield curve is upward sloping.Under this condition,then we could be sure that
A) Inflation is expected to decline in the future.
B) The economy is not in a recession.
C) Long-term bonds are a better buy than short-term bonds.
D) Maturity risk premiums could help to explain the yield curve's upward slope.
E) Long-term interest rates are more volatile than short-term rates.

Question

Quizplus · Accepted Answer

The upward sloping yield curve indicates that long-term interest rates are higher than short-term rates. Maturity risk premium helps explain this phenomenon as investors demand higher returns to compensate for the additional risk of holding longer-term bonds. The other options do not necessarily follow from an upward sloping yield curve.

Assume That the Current Corporate Bond Yield Curve Is Upward