An upward-sloping yield curve that indicates generally cheaper short-term borrowing costs than long-term borrowing costs is called
A) normal yield curve.
B) inverted yield curve.
C) flat yield curve.
D) none of the above.

Question

Quizplus · Accepted Answer

A normal yield curve is upward-sloping and indicates that long-term borrowing costs are higher than short-term borrowing costs. This is because lenders generally require higher rates of return for lending their money for longer periods of time. Therefore, the cheapest option for borrowing is in the short-term, making the yield curve slope upwards.

An Upward-Sloping Yield Curve That Indicates Generally Cheaper Short-Term Borrowing