If the yields on short-term securities are higher than comparable long-term securities,the yield curve will be:
A) level.
B) negative.
C) positive.
D) undefined.

Question

Quizplus · Accepted Answer

When the yields on short-term securities are higher than comparable long-term securities, it is referred to as an inverted yield curve, which means that the yield curve will be negative. This is contrary to the normal yield curve, where long-term securities have a higher yield than short-term securities.

If the Yields on Short-Term Securities Are Higher Than Comparable