The term structure of interest rates is the relationship between ________.
A) the present value of principal and coupon rate of the bonds
B) the general expectation of inflation and nominal rate of return for bonds
C) the general expectation of inflation and real rate of return for bonds
D) the maturity and rate of return for bonds with similar level of risk

Question

Quizplus · Accepted Answer

The term structure of interest rates shows the relationship between the maturity and rate of return for bonds with similar levels of risk. It is a graphical representation of the yield curve, which shows the interest rates for bonds with different maturities. Factors such as inflation, economic growth, and monetary policy can affect the shape of the yield curve, but the term structure is primarily driven by supply and demand for bonds with different maturities.

The Term Structure of Interest Rates Is the Relationship Between