The term structure of interest rates is the pattern of interest rate yields for securities that differ only in ____.
A) default risk
B) liquidity premiums
C) the yield to maturity
D) the length of time to maturity

Question

Quizplus · Accepted Answer

The term structure of interest rates is based on the yield curve, which shows the relationship between the interest rates and the time to maturity for a set of similar securities. Therefore, the only factor that differs among these securities is the length of time to maturity. The other factors, such as default risk or liquidity premiums, can affect the yield for each security but do not determine the overall pattern of the term structure.

The Term Structure of Interest Rates Is the Pattern of Interest