The expression 'term structure of interest rates':
A) reflects the differing tax treatment received by different securities.
B) represents the variation in yields for similar instruments differing in maturity.
C) always results in an upward-sloping yield curve.
D) generally results in a downward-sloping yield curve.

Question

Quizplus · Accepted Answer

The term structure of interest rates refers to the variation in yields for similar instruments differing in maturity, resulting in a yield curve that may be upward-sloping, downward-sloping or flat. This reflects the expectation of investors for future interest rates and inflation rates, as well as the risk premiums associated with longer-term investments.

The Expression 'Term Structure of Interest Rates