Nominal U.S.Treasury bond yields:
A) are constant over time.
B) are equal to the real yields.
C) include a default premium.
D) include an inflation premium.

Question

Quizplus · Accepted Answer

Nominal U.S.Treasury bond yields include an inflation premium, which is the additional compensation investors require to protect against the erosion of purchasing power due to inflation. The other options, A, B, and C, are incorrect. Nominal U.S.Treasury bond yields are not constant over time (they fluctuate with market conditions), they are not equal to real yields (which do not include an inflation premium), and they do not include a default premium (U.S. Treasury bonds are considered to be risk-free).

Nominal U.S.Treasury Bond Yields