Which of the following statements is true?
A) Downward sloping yield curves typically appear in the early to mid-period of a business expansion.
B) The interest rate risk premium always adds an upward bias to the slope of the yield curve.
C) If investors believe that inflation will be increasing in the near future, the yield curve will be downward sloping.
D) the yield curve most commonly observed is downward-sloping.

Question

Quizplus · Accepted Answer

The interest rate risk premium is added to longer-term bonds to compensate investors for the increased risk of holding bonds over a longer period. This premium typically results in an upward slope of the yield curve, as longer maturities will have higher yields to compensate for this risk.

Which of the Following Statements Is True