Which of the following statements is true?
A) The longer the maturity of a security, the greater its interest rate risk.
B) If investors believe inflation will be subsiding in the future, the prevailing yield curve will have a positive slope .
C) The real rate of interest varies with the business cycle, with the lowest rates at the end of a period of business expansion and the highest at the bottom of a recession.
D) The interest rate risk premium always adds a downward bias to the slope of the yield curve.

Question

Quizplus · Accepted Answer

This statement is true because securities with longer maturity periods are exposed to interest rate risk for a longer period of time, making them more sensitive to changes in interest rates.

Which of the Following Statements Is True