Understanding the Yield Curve

Very Easy Fixed Income Valuation Term Structure Of Interest Rates

In the context of fixed income securities, the term structure of interest rates represents the relationship between interest rates (or bond yields) and different maturities of debt securities.

The yield curve is a graphical representation of this relationship. It typically shows how the yield on bonds varies with changes in their maturity dates.

Which of the following statements best describes the yield curve?

The yield curve is always upward sloping, reflecting increasing yield with longer maturities.

The yield curve illustrates the relationship between interest rates and the time to maturity of debt securities.

The yield curve only applies to corporate bonds and not to government bonds.

Hint

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