The term structure of interest rates can be described as the:
A) Relationship between the spot interest rates and the bond prices
B) Relationship between spot interest rates and stock prices
C) Relationship between spot interest rates and maturity of a bond
D) None of the above

Question

Quizplus · Accepted Answer

The term structure of interest rates describes the relationship between spot interest rates (also known as the yield to maturity) and the maturity of a bond. It shows how interest rates vary across different maturities, with longer-term bonds usually having higher yields than shorter-term bonds. This information is often graphed as a yield curve, which can be used to make investment decisions and assess the overall health of the economy. Neither A nor B accurately describe the term structure of interest rates.

The Term Structure of Interest Rates Can Be Described as The