Assuming the yield curve and the term structure are both upward sloping at all maturities, which of the following will have the highest interest rate as measured by their yield to maturity?
A) 20-year maturity STRIP bonds.
B) 2-year maturity Canadian government bonds.
C) 5-year maturity municipal bonds.
D) 3-month maturity Canadian T-bills.
E) Insufficient information.

Question

Quizplus · Accepted Answer

Bonds with longer maturities typically have higher interest rates than those with shorter maturities, assuming an upward sloping yield curve and term structure. Therefore, the 20-year maturity STRIP bonds would have the highest interest rate as measured by their yield to maturity.

Assuming the Yield Curve and the Term Structure Are Both