Understanding the Yield Curve

The yield curve is a graphical representation of the relationship between interest rates and the maturities of debt securities. It is an essential tool for understanding interest rate risk, pricing debt, and evaluating economic forecasts. In its typical upward-sloping form, the yield curve suggests that long-term debt instruments have a higher yield compared to short-term instruments. However, various factors can impact the slope and shape of the yield curve.

Considering the basic concepts of yield curve construction, which of the following statements accurately reflects an essential characteristic of the yield curve?