The interest rate on one year Treasury Bonds is 5 percent.The interest rate on five year Treasury Bonds is 7.5 percent.The interest rate on ten year Treasury Bonds is 10 percent.What is true about the yield curve?
A)It is upward sloping.
B)It is downward sloping.
C)It is a horizontal curve.
D)It is a vertical curve.
E)It is parallel to the x-axis.

Question

Quizplus · Accepted Answer

The yield curve is upward sloping because the interest rates increase with the length of the maturity period: from 5 percent for one year, to 7.5 percent for five years, to 10 percent for ten years.

The Interest Rate on One Year Treasury Bonds Is 5