The term structure of interest rates is the pattern of interest rate yields for debt securities that are similar in all respects except for differences in
A)tax status
B)liquidity
C)risk of default
D)maturity

Question

Quizplus · Accepted Answer

The term structure of interest rates is primarily based on the differences in maturity of debt securities. The maturity of a security determines its interest rate yield, with longer-term securities typically offering higher yields to compensate for the increased risk and uncertainty associated with holding the security for a longer period of time. Differences in tax status, liquidity, and risk of default may also impact the interest rate yield of a security, but they are not the primary drivers of the term structure of interest rates.

The Term Structure of Interest Rates Is the Pattern of Interest