Assume that the current yield curve is upward sloping or normal. This implies that:
A)short-term interest rates are more volatile than long-term rates.
B)inflation is expected to subside in the future.
C)the economy is at the trough of a business cycle.
D)long-term bonds are less attractive to investors than short-term bonds.
E)short-term interest rates are lower than the long-term interest rates.

Question

Quizplus · Accepted Answer

An upward sloping yield curve implies that short-term interest rates are lower than long-term interest rates. This is because investors demand a higher return for lending their money over a longer period of time to compensate for the higher risk of holding the bond for a longer period.

Assume That the Current Yield Curve Is Upward Sloping or Normal